Highways Agency - Safe roads, Reliable journeys, Informed travellers

Selecting and Working with Suppliers

Issue

The new procurement strategy will result in a tendency towards fewer, better quality suppliers appointed on a long-term basis. It will be vital that the best suppliers are employed. There needs to be a clear understanding of what aspects of quality add real value to the service delivery and the requirements and procedures need to be consistent and transparent to suppliers.

Objectives

To ensure that the HA identifies and employs suppliers that can work in partnership to deliver best value services and solutions, and to incentivise good performance by fair rewards.

To select suppliers on the basis of the optimal combination of quality and price which for any particular service or project will achieve the delivery of best value.

To maintain a supplier base that is competitive and sustainable, and which is motivated to seek work from the HA and to achieve continual improvement.

Actions

Eligibility and Suitability Criteria

There will normally be a two-stage approach to selecting suppliers. The first stage will be pre-qualification where the main criteria will be related to eligibility. Use will be made of ConstructionLine to assist the process of producing a shortlist.

At tender stage, quality criteria used for selection purposes will look at suitability and focus on those aspects of quality that contribute most to added value. The criteria and the weightings will vary depending on the nature of the work but the intention will be to ensure that requirements are transparent and that assessments are consistent. For most services and projects there will be high emphasis placed on:

• People policies
• Health and safety
• Supply chain management
• Environmental performance
• Partnering culture
• Price, cost management and control.

People Policies - selection criteria

The HA will look for evidence from suppliers that they have a commitment to their staff, such as Investors in People accreditation or procedures based on the Movement for Innovation's (M4i) Respect for People toolkits. This will help to give comfort that staff are being developed in terms of culture, skills and competencies. It is also an important consideration in assessing a firm's ability to recruit and retain the skilled resources needed to deliver the programmes of work.

Health and Safety - selection criteria

Health and safety policies and performance will be a very important factor in the selection of suppliers. Firms will need to demonstrate a strong corporate commitment which is supported by a robust health and safety structure and a good safety record. This is discussed in more detail in the section on health and safety.

Supply Chain Management - selection criteria

The integration and incentivisation of the whole of the supply chain will be given high importance in the selection of suppliers as this is a major factor in the delivery of best value. The supply chain needs to be incentivised and rewarded for effective risk management and contributing to added value. This will require that the allocation of risks is applied fairly and consistently throughout the supply chain.

The supply chain management policies and performance of main suppliers will be scrutinised to ensure that the benefits of integrated teams are delivered. The HA will look for evidence of good practice such as the use by main suppliers of the Construction Industry Board's guidance on the "Selection of Sub-contractors".

The relationship between contractors and their designers on design and build contracts will be particularly important. The HA will require arrangements that incentivise the development of best value solutions and not solutions that are simply the cheapest to design.

Environmental Performance - selection criteria

The HA will seek to improve the overall performance of its suppliers by requiring them to be in possession of an accredited Environmental Management System (EMS) or meet the requirements of an HA EMS. Sustainability will be integrated into procurement decisions ensuring that contributions to sustainability are taken forward within the framework of best value.

Partnering Culture - selection criteria

The HA will require evidence that firms have developed a partnering culture throughout their organisation and with their supply chain. Suppliers will need to demonstrate a senior level commitment to support project teams in a partnership approach to deliver mutually agreed common objectives.

Price, Cost Management and Control

The emphasis in the selection process will be on quality aspects, seeking to select the firms best able to identify optimal solutions and to deliver them efficiently and safely. Price will be taken into account in terms of affordability and how much the HA will pay for added value. This, together with the quality/price ratio, will be determined on an individual project basis and will take account of the specific circumstances and requirements.

The HA will assess the attitude and ability of firms to manage risks, remove wastage, improve efficiency and to control costs.

The HA will use risk schedules to help ensure that potential risks are identified during the tender period and are allocated clearly and fairly under the contract.

The HA will accept risks where appropriate provided that suppliers play a full part in effective risk management to minimise cost consequences.

The HA will place more importance on the ability of suppliers to estimate project costs, including risks, and to forecast expenditure accurately. The success of long-term relationships depends on reliable and robust cost estimates to develop affordable forward programmes.

Payment profiles will be used in contracts where necessary to provide greater certainty of expenditure. Arrangements may also be introduced to recover penalties incurred by the HA as a result of poor forecasting by a supplier.

The HA will continue to work to the high standards of its prompt payment initiative which sets demanding targets for the payment of invoices within 30 days. The HA will require its main suppliers to treat the supply chain in the same way and performance monitoring in this respect will be carried out.

Minimise the burden of Tendering on Industry

The HA recognises the high cost of tendering and that these costs do ultimately find their way back to clients. Procedures will be introduced to keep tendering costs to a minimum. This will include the continuing use of ConstructionLine and in addition the HA will invite firms to submit certain general information on an annual basis to avoid the repetitive submission of data for individual tenders. The number of tenderers will be in line with the minimum required by procurement legislation that is aimed at ensuring fair competition. The need for detailed design submissions and technical approvals during the design period will be kept to a minimum.

It will be normal practice to hold meetings or clinics with tenderers during the tender period. This will be aimed at ensuring that tenderers understand requirements and the scope for alternative proposals. This will help to avoid any abortive effort and help to ensure that compliant bids of an appropriate quality are submitted.

The Structure of Suppliers

Suppliers will have the option of developing 'one-stop shop' service delivery with all necessary resources in-house, or establishing consortia or joint ventures with appropriate supply chain arrangements. With joint ventures, or similar, it will be important to demonstrate how all of the necessary services will be delivered and how the different elements will be brought within appropriate quality systems. In the case of joint ventures the HA will have a preference for arrangements which show a commitment to a long-term relationship.

Small and Medium Size Firms

The HA's programme of work, together with that of other clients, is increasing and it will be important to ensure that there are adequate resources available to deliver the programmes. It will mean that the HA will continue to make use, where appropriate, of good quality, small or medium size firms either directly or through the supply chain.

The HA will put much emphasis on the need for main suppliers to adopt supply chain management policies and practices which integrate, incentivise and reward good performance throughout the supply chain. This will need to include an equitable allocation of risks throughout the supply chain. Where this operates effectively, there should be no difference for firms in the supply chain, between working directly for the client and working for a main contractor.

Supplier Performance Assessment and Reporting

The HA will work with its suppliers to establish consistent indicators which can be used to identify best practice and measure performance of all those involved in project or service delivery. The need to demonstrate continual improvement will be the basis of longer-term partnerships.

The HA will introduce 360-degree reporting throughout the supply chain, including suppliers reporting on clients, to ensure that partnerships are operating effectively. Performance reports will be required for all projects or on a regular basis for the delivery of ongoing services. Regular performance reviews will be undertaken and the HA will require proposals for addressing inadequate performance.

A new HA Supply Chain Management Team will be established to manage supply chain relationships. Particular attention will be given to the development of business relationships with its key suppliers including the agreement of strategic management objectives to improve standards of business delivery. The team will be responsible for performance reviews and will maintain regular contact and carry out site and office visits to assist in the "reality checking" of quality promises and submissions. The assessment of performance will be fed back into the supplier selection process to help judge capability and suitability of firms.