Simple steps to better procurement

By PETER SILCOCK, CHIEF EXECUTIVE, CIVIL CONTRACTORS NEW ZEALAND

CCNZ PLANS TO step up its support, encouragement and advocacy for improved procurement by publishing a one page “4 ways to fill your tender box” contractors’ guide to great procurement.

With investment in infrastructure topping $11 billion a year, more and more clients are saying that they can’t get enough contractors to bid for their work.

This is a major issue for clients because without healthy competition, it’s hard to ensure you are getting long term value for money.

Malcolm Edridge, chair of Civil Contractors New Zealand’s Nelson/Marlborough Branch, recently commented on the workload and the challenges facing local councils saying that “the industry could handle the workload, but will need flexibility from the councils”.

Malcolm’s comment applies to all clients. Rather than bemoaning the lack of contractor capability and capacity clients need to step up by asking the question – Can we make our work more attractive to bid on? The answer for most clients is definitely yes!

Good contractors will assess the risks, complexity, timing and resources they need to compete for and complete any project. Clients need to face the fact that a lack of tenders often has very little to do with contractor capacity or capability and is more about poor procurement process, unattractive terms and conditions and unacceptable risks.

CCNZ got a few experienced contractors to share their ideas and we came up with four simple steps clients can take to attract the best suppliers.

1. Use simple, user-friendly RFT documents to save time and cost for both parties.

A well-designed response template with clear instructions makes a huge difference. Start with clear pass/fail criteria early in your process, designed to eliminate unsuitable suppliers. Then streamline your scored questions so every single question tests a differentiator that’s clearly aligned to your project’s specific drivers for success.

2. Let them know what’s coming.

If they know your pipeline, your suppliers can position themselves to deliver to your needs, and plan their tenders well. You’ll get more tenders in the box, and they’ll be better quality. Engage with your contractors and the local branch of Civil Contractors New Zealand.  Visibility and certainty of workloads enables your suppliers to smooth their work programmes.  Overall result? Better management of work peaks and troughs = lower overheads = lower costs all round.

3. Use standard Terms & Conditions.

If your tender documents are overlaid with non-standard conditions, your smart contractors will engage lawyers to check them. That cost inevitably finds its way into your tender box. Not-so-smart tenderers will ignore your special conditions, and are far more likely to get you into disputes later. Either way, this won’t deliver value for you. Stick to standard Ts & Cs, and you’ll eliminate extra costs on both sides. What’s more, your suppliers will be far more likely to tender.

4. Don’t load up the risks!

It’s tempting for you to de-risk a contract by transferring all risks to your supplier, or inserting clauses that pass on responsibility to your suppliers if the information in your tender documents is incorrect. The problem is that risks that are outside contractors’ control generally can’t be covered by insurance. So, the only response for informed suppliers to risk transfer, is to increase their prices.  Of course, the not-so-smart suppliers won’t factor in those risks, but when the mucky stuff hits the fan you will face costly disputes or be left to carry the can. NZS 3910 requires clients to take the risk of loss or damage in respect of ‘excepted risks’.  That means if it’s outside your contractor’s control, you should take on that risk yourself. Not only will your suppliers be keener to tender, but their prices will be lower and your relationships with them will be more cooperative. That way, everybody wins.

We plan to publicise the one page document and use it as a basis for discussions when we meet with clients. We know that better procurement is a big issue for contractors and that change will take time but we will continue to work on this issue at a national, regional and local level.

Good procurement practice and a strong pipeline of work will encourage and enable contractors to build their capability and capacity.

Better procurement is good for everyone.