Business Matters

Improving the contract market

This article first appeared in Contractor February 2017.

Based on a presentation at the NZTA/NZIHT 2016 conference by Caroline Boot from Clever Buying and Plan A. By ALAN TITCHALL.

HAVING AN INTEREST in both the client and supplier side of contracting places Caroline Boot in a unique place as an observer of tendering trends and challenges.

“Everyone talks about smart procurement, but it is like teen sex; they all say they are doing it, but very few are, and those that are – are doing it very badly,” she says.

Caroline Boot sums up the findings of the surveys with the following advice for clients, such as councils:

Work closely and cooperatively with your suppliers: Be easy to deal with; show them your pipeline; help them improve; be reasonable. Provide opportunities for big and small companies.

Be clear what you want and how you will score it: Keep the process simple, efficient and relevant. Decide on fact-based scoring before you look at the responses.

Don’t waste everyone’s time on repetitive generic info: Use prequalification or supplier panels – (but make it easy). Don’t blindly recycle RFTs – every project has different drivers for success.

Select your suppliers on a sensible and fair basis: Don’t overemphasise price. Lowest Price Conforming makes it a race to the bottom, and seldom delivers best value. Ask the right questions – on project-specific risks and opportunities (only).

Don’t rush the process: Get your RFx documents accurate, well planned and complete before release. Give sensible timeframes for responses (four plus weeks should be normal).

Her presentation at the NZTA/NZIHT conference was based on two surveys that have been recently sent out – one to a large database of companies that regularly prepare tender submissions, and the other to the clients they typically prepare tenders for.

The surveys asked both clients and suppliers for information and advice on the right way to put out a tender and the right way to submit one.

“Given that we gave them a very short space of time to complete the survey, we got over 60 very insightful responses,” Caroline says.

“Among the clients there were both small and large councils and private organisations such as Fonterra.

“The majority of suppliers were civil contractors.”

Most clients said they had experienced a decrease (or no change) in the number of tender responses they received, and some commented on an improved quality of tenders.

Among suppliers “insufficient time” was clearly the biggest concern, along with tenders that were too focused on price.

“Suppliers say they don’t want to engage in a price war, especially when work is plentiful,” says Caroline.

“Lowest price conforming is seen to be a race to the bottom.

“If you do use it – don’t ask for a whole lot of generic attributes. Be specific: ditch those generic questions that contribute little towards finding the best bidder for the job. Importantly – don’t transfer all the risk to suppliers.”

Basically, suppliers want ‘reasonable’ time to respond, a clear scope and a simple process.

The clients’ advice was clear: Suppliers need to answer every question while providing confidence that they really understand the contract. It’s also important to make it clear how your company stands out from other companies in its mitigation of the project’s risks; or what opportunities you bring to add value.

“They see a lot of waffle in tenders. Keep it in focus.”

Caroline’s presentation included a panel discussion with Malcolm Abernethy from the CCNZ (representing suppliers); Jack Hansby from the NZTA; Dave Colquhoun, procurement manager at Auckland Transport; and Neil Cook, as acting Northland Transportation Alliance manager.

Malcolm Abernethy’s advice to clients was to provide plenty of response time and treat negotiations throughout the contract fairly – especially in areas such as variations and extensions of time.

“Reduce the RFT requirements and special conditions, and don’t ask for reams of attributes on a Lowest Price Conforming tender – that’s a waste of everyone’s time and ultimately that will be built into the contract costs, one way or another,” says Malcolm.

He gave an example of a council client that puts out a lot of design and construct tenders that are very demanding and onerous on suppliers.

“They are demanding on the contractor who has to come up with the cost for the preliminary design, and they’re a waste of resources because four or five similar designs are all developed in parallel, making the overall costs of tendering many times greater than necessary.

“Unless it’s really specific, or a large project, then it is probably not worth going down the design and construct route.”

Malcolm says CCNZ members would also like a “reasonable and clear forward work programme”.

“It doesn’t have to be 100 percent accurate, but we need to know what is coming on line so we can prepare for it. A lot of the decisions on whether to submit a tender are based on capability and resources within a contracting company.”

Malcolm says Wellington Water has been reviewing its procurement strategy and consulting with contractors, which is a step in the right direction.

“They are taking some of the concerns we have mentioned on board.

“And consultation is important because the supplier market is so important to you as a client. If you want the best suppliers, you need to create an environment where suppliers trust you and value the relationships they have with you.”

Contracting around the country has different constraints, he added.

“Often in large cities contract work has to be done at night, or on a site with severe time restrictions.

“For example, on Auckland’s roads you can’t put out traffic controls until after 9am; you are not allowed to start work until 10am; you have to start to take traffic control back at 2pm; and clear the site by 3pm.

“This means a project that might normally take about two weeks probably takes about eight weeks.

“And what does the contractor do with his team between 7am and 10 am and 3pm and 5pm? There’s no time, particularly in Auckland, to go to another job.”

The last point Malcolm made was in support of small contractors.

“You should appreciate that suppliers come in different sizes, and small contractors eventually turn into large ones, but they need work in the meantime.”

Neil Cook, representing small councils, says the Northland Transportation Alliance, made up of three regional councils and the NZTA, was a response to the challenge of getting suppliers in the region.

“It is the ultimate in collaboration between districts and regions in the process of pooling resources,” he says.

“We hope to see a range of benefits across the contracting spectrum, including a [collaborative] procurement review process that will be the foundation of how we do things together into the future.”

Forming this alliance involved a lot of consultation with the civil contracting sector, where the feedback was very similar to the results of the Clever Buying survey, he adds.

Representing one of the biggest council agencies in the country Dave Colquhoun says keeping all parties happy is a “massive challenge”.

“We do recognise that a lot of tendering we do at Auckland Transport is inefficient in terms of money and time.

“Optimising how we procure is a tricky act. My team is taking on some of these issues at the moment in terms of sufficient time, standardising templates and being absolutely clear about our requirements. We’re making good use of evaluation spreadsheets so we get price and non-price weightings right for the project; and focusing on asking relevant questions that are easy to answer.

“Also – come and talk to us.

“I find with the tendering process there’s a wall between parties, which we don’t need. We invite discussion with you about anything, anytime. Don’t be afraid to contact me for a chat about what’s working for you and what’s not.”

Jack Hansby made the shortest presentation – literally one sentence.

“I focus on three key things – engage with the industry; provide advance notice of work coming up and stick to that programme; and don’t use expediency as an excuse (just repeating existing contracts).”

The presentation – and the survey that underpinned it – highlighted a high level of commonality between suppliers and clients on their views on procurement. Both suppliers and clients want the process to be transparent, fair, impartial, cost-efficient and fit-for-purpose.

Related posts

All in the family

Vijay Naidu

Negotiated contracts vs tenders- a business coach’s perspective

Vijay Naidu

The challenge with association memberships

Vijay Naidu