Procurement of Awarding Body Services

Buyers Guide

Version 1 December 2011

Contents

1.Background

2.Aims and Objectives

3.Requirements for Public Funding

3.1What is Procurement?

3.2What is Value for Money (VFM)?

3.3European Regulations on Procurement

3.4What are the Principles of EU procurement?

3.5Financial Probity

4.Intelligent Purchasing

4.1Who should be involved with the buying of awarding organisation services?

4.2Have you considered a Commissioning Plan?

4.3What do we mean by Commissioning?

4.4Risk Assessment

4.5Risk management

4.6Contracts Register

5.Contractual Terms and Conditions

5.1Details of the contract and potential clauses with the Awarding Organisation Services

6.Complaints to the Regulator (Ofqual)

7.Quick Reference

8.Useful links

1.Background

The Coalition Government’s Skills Strategy (Skills for Sustainable Growth, November 2010) outlines the strategic context for and momentum to the work to reducing the bureaucracy and costs associated with colleges and other training organisations purchasing qualifications. The Strategy sets out some approaches for achieving this, including the possible development of a procurement framework mechanism through which the sector can buy services from awarding organisations from an agreed service catalogue(See page 11).

The Skills Funding Agency is working with the Department for Business, Innovation and Skills (BiS) as well as the sector to develop collaborative and shared service solutions for the sector. The aim of this work is to develop more efficient ways of working across the sector. This work supports the Coalition Government’s move towards allowing colleges and training providers more freedom and flexibility and this work directly aligns with the wider cross government work being undertaken by the Cabinet Office’s on Government Efficiency.

The Skills Funding Agency is working work with the sector on shared services and securing efficiencies is an important agenda item for us all. The government has made this clear to the sector. The Agency is taking forward this work through a joint programme of work with the Association of Employment and Learning Providers and the Association of Colleges in supporting good practice and better procurement across the sector in the context of awarding organisation fees and services. Part of this work with the sector is the development of this Buyer’s Guide. The purpose of this Buyer’s Guide is to support the sector to improve their procurement practices, in particular those relating to the purchasing of awarding organisation services. But we also want to actively support the sector in leveraging efficiencies, where appropriate, in this area.

How does this affect colleges and training organisations?

The Chief Executive of Skills Funding is responsible for providing an assurance on the public funding which is administered through the Skills Funding Agency to its approved colleges and training organisations. Additionally, in October 2010, the Office of National Statistics decided that Further Education (FE) Corporations in England and Wales should be reclassified, to Central Government more information about this can be found here. The impact of these two factors means it is as important as ever that colleges and training organisations procure in a legally complaint way, as well as being a condition of funding, colleges and training providers need to ensure they comply with European procurement rules when they purchase services, and this includes awarding organisation services.

2.Aims and Objectives

The intention of this Buyer’s Guide is to provide some practical advice and guidance to the sector on the procurement of their services, with a particular focus on the buying of awarding organisation services for colleges and training organisations.

With a collective spend of approximately £200 million for English FE Colleges, Awarding body services make up the largest regular non pay cost for all Colleges

What are not the aims of this Buyer’s Guide?

The aims of this Buyer’s Guide are not:

To replace or undermine the need for qualified procurement professionals.

To provide an assurance on the administration of public funding. Colleges and training organisations must ensure they have administered public funding in a legally compliant way, the aim of this Buyer’s Guide is not the replace or to diminish the responsibilities of either colleges or training organisations of providing this assurance to the Chief Executive of Skills Funding.

The Agency has also been working with the Ofqual who have the responsibility for regulating awarding organisation services and will continue to do so in the future. Ofqual and the Agency share similar concerns and aims with regard to seeking greater efficiencies around how awarding services are purchased by the sector. Both Agencies have the shared the objective of seeking greater efficiency in the purchasing of qualifications and therefore the services of awarding organisations, without inhibiting competition and innovation. It is the Agency’s intention that this Buyer’s Guide will seek to set out the benefits of more efficient purchasing of awarding organisation services with the potential of introducing a procurement framework in the future.

3.Requirements for Public Funding

3.1What is Procurement?

Public procurement is the process whereby public sector organisations acquire goods, services and works from third parties. Procurement is one of the fundamental functions common to all types of business. It is fundamental because without robust procurement processes you cannot achieve our core aims and objectives. By its very nature, procurement is an integral part of business management.

It’s also worth remembering there is a legal duty on procurers to provide value for money (VFM). This is because of:

EU procurement directives and the need to demonstrate competition (in most cases this can only be undertaken by professionally trained staff).

3.2What is Value for Money (VFM)?

VFM is the highest quality goods/services at the best possible overall cost, but not necessarily at the lowest price. Value for money is about achieving the best outcome for the money spent by assessing both the costs and benefits of each purchase rather than simply focusing on the lowest cost. This means that, in anticipating the price to pay, colleges and training organisations should consider other aspects such as customer service, support costs, overall performance and quality. Factors such as these may justify a higher initial cost in the expectation of lower whole life costs.

One of the best ways to get VFM is through competition. It is a fundamental principle (and in many cases a legal requirement) that public sector contracts should be let as a result of some form of competition. Colleges and training organisations can also endeavour to achieve value for money when placing purchase orders by exploring the market and obtaining quotes for a comparison of prices.

3.3European Regulations on Procurement

All public bodies that are purchasing services and using public funding to do so are subject to the European Union procurement Directives, they apply to the purchasing of goods, services, civil engineering or building works. More information on the rules that govern public sector procurement can be found on the Office of Government Commerce website. The aim of this Buyer’s Guide is to raise awareness of the issues and regulations, which relate to the procurement of public funding in order for colleges and training organisations to satisfy them, they have done so in a fully legally compliant way.

The Chief Executive of Skills Funding is responsible for providing an assurance on the pubic funding paid to colleges and training providers. Part of this assurance is to ensure that the money paid in the form of a grant or a contract is administered in a legally compliant way, including adherence to the EU procurement regulations. EU compliance has always been a condition of funding and the reclassification of further education institutions and sixth form colleges (mentioned earlier) as central government has highlighted the risk of potential non-compliance and it is hoped that this Buyer’s Guide will assist the Agency’s approved providers to do this.

So when considering purchasing a service an organisation needs to consider whether the cumulative amount of funding spent on that service is over the EU threshold to determine the most appropriate procurement route. More information on EU categories for service and procurement thresholds can be found on the Office of the Government Commerce web pages. For purchases that are below the threshold, there is also the expectation that colleges and training providers would consider competitively tendering for all work as this would be considered as best practise to secure the best use of public funds, obviously when considering a decision about procurement an organisation would have to also take into consideration what would be most cost effective.

It is worth remembering that the EU threshold is applied to the total spend on the service, that is the total aggregated amount of the procurement. This applies when there are one or more contracts for the delivery of the same service and also where there is only one contract but the provider is buying a number of related services from that contractor which would have been purchased and therefore contracted for at the same time. It is the total amount of spend in the service area which triggers the EU thresholds. Where the work involves more than one contract the estimated value of all the contracts must be aggregated to decide whether the EU threshold has been reached. So, in the case of awarding organisation services, it would be the total amount a College or a training organisation spends on this service. More information on the current EU thresholds can be found here together with the rules that govern public procurement.

3.4What are the Principles of EU procurement?

Transparency of procedure

Equality of treatment for bidders

Equal access

Adequate competition

Defined contract award procedure

Pre-qualification of suppliers based on their capacity to fulfil the contract.

In January 2007, HM Treasury published;

“Transforming Government Procurement”, at the time John Healey the then Chief Secretary to the Treasury. Good procurement is essential to ensure good public services, from buying goods and services that work as they are supposed to, to achieving savings that can be ploughed back into front-line services. The public sector spends over £125 billion a year procuring a wide range of goods and services, from every day items such as pens and paper, to major construction projects such as schools and hospitals. All those who, as taxpayers, use and fund public services have the right toexpect government to meet the highest professional standards when it procures on their behalf.”

3.5Financial Probity

All purchasing professionals have a duty regarding financial probity. Individual’s whose role incorporates procurement are in very powerful position because of their involvement and influence over the contract award process and they need to be aware of this in all of their dealings, especially those with suppliers. The highest professional standards of conduct should be observed at all times to prevent any challenge which could impact on the procurement and also against any irregular dealings. Purchasing professionals should be independent and continually demonstrate the highest integrity.

Colleges and training organisations should consider defining their code of conduct (CIPS have an example code) for all their employees in a document, which covers supplier relationships, gifts, hospitality and procurement. Best practise would be for the code of conduct to be included as part of the procurement process and it should be published. Colleges and training organisations should ensure that all employees who in any capacity are involved with the potential awarding of a contract need to complete a declaration of interest form.

The Chief Executive of Skills Funding has a zero tolerance of fraud or any other financial irregularity. So the same is expected from all of the Agency’s approved colleges and training organisations. This approach should be replicated by providers through their supply chains.

4.Intelligent Purchasing - The Procurement Cycle

What is the service you want to buy?

Have you drawn up a Service Specification?

Who should be involved in your purchasing decisions and agreeing what you want to buy and when?

4.1Who should be involved with the buying of awarding organisation services?

Key stakeholders. A college or training organisation may wish to think about who is involved with their purchasing decisions and when. Suggestions of who should be involved with the purchasing of the service, including development of the specification, you should include a main user such as a teacher/lecturer who knows about the service; curriculum planner; purchasing professional and budget holder.

4.2What do we mean by Commissioning?

Commissioning can be defined as:

“The process of specifying, securing and monitoring services to meet people’s needs at a strategic level, and evaluating the outcomes of the process”[1].

It covers the activities of

  • Identifying Needs
  • Mapping existing services
  • Reviewing services and appraising
  • Configuring services within resources available
  • Purchasing and Procuring Services
  • Managing the Market
  • Managing Contracts
  • Reviewing and evaluating services

The Commissioning and Procurement process therefore need to:

  • Be open, transparent and Fair
  • Be accountable and legal
  • Have the confidence of all stakeholders
  • Be well planned and managed
  • Enable participation

In particular a commissioning plan for the services purchased from awarding organisations will bring together all the subject and/or skills areas in one place.

This has the advantages of allowing a college or training provider to have:

Greater control over their spend on awarding organisation services, not only the amount but it identifies which awarding organisation and when it needs to be purchased;

Assists the Finance Director, or equivalent, with budget planning and cash flow management;

Strengthens the negotiating position of the college or training provider through strong central management;

Allows the purchasing organisation to have a greater strategic understanding of their relationships with their suppliers, in this case awarding organisations, which leads to more effective management of the service and therefore that relationship;

Allows greater budgetary control, preventing the creeping hidden costs associated with awarding organisation services.

Supports the organisation’s ability to understand their financial commitment and is therefore a tool which assists with identifying where savings can be achieved.

Supports the strategic planning both academic and financial of the collegeand training organisation.

4.3Have you considered a Commissioning Plan?

Colleges and training organisations may wish to consider a commissioning plan. A commissioning plan defines the strategic need for a set period of time of the procurement activity; a reasonable time would be about 5 years for the plan which should be reviewed annually. A commissioning plan has to potential to act as a public statement which defines the college’s or training organisation’s principles and processes by which they intend to strategically plan, commission and procure for goods or services. The commissioning plan will need to reflect the corporate aims and objectives of the organisation as well as providing an assurance on the procurement of public funds.

A commissioning plan should clearly state what needs to be procured and when, it should also give some consideration to what needs to be decommissioned. The commissioning plan will set out the total amount of commissioning and procurement that will take place over the period of the plan. The procurement plan will state when and how services will be purchased. Commissioning is therefore often seen as a circular process.

A commissioning plan should cover the following areas:

Commissioning Approach

Commissioning Processes

De-commissioning Processes – where considerations for the ‘need for the service’ ie strategic relevance should be given, evidence requirements.

Consultation

4.4 Risk Assessment

Risk Management should be embedded into the governance of all colleges and training organisations in functional areas such as strategic planning; financial planning, business continuity management etc. It is a critical element which should underpin any purchasing or procurement.

The Audit Commission’s definition of risk is:

“Risk is the threat that an event or an action will adversely affect an organisations ability to achieve its objectives and to successfully execute its strategies”.

Risk is the probability of something occurring and its consequential impact.

4.5Risk management

Colleges and training organisation need to ensure there is a robust risk management strategy for any procurement exercise they undertake.

There is a need to identify the type of risk for example Financial, Political, Legal, Supplier Failure.

Risk identification for the purchaser, factors which are:

under the control of the buyer

under the control of the supplier in this case, awarding organisation

arising out of the contractual relationship

risks that are outside of both the purchaser and/or the supplier.

The college or training organisation then needs to consider the owner of the risks and what the risk mitigation will be. This will be captured in the form of a risk analysis and recorded within the risk register, which should be updated frequently.

4.6Contracts Register

To ensure effective management of an organisation’s contracts a central contract register should be maintained, which lists all of the contracts with the organisation together with relevant details.

It is also now a requirement as part of the move towards greater transparency in Government for all public sector contracting organisations to make available to the public a list of their contracts. More information can be found on the Officeof Government Commerce website.

5.Contractual Terms and Conditions

The Chief Executive of Skills Funding expects all services purchased using public funds, and in particular the purchasing of awarding organisation services to have a written contract between the college or training organisation and the awarding organisation/supplier.

The terms and conditions of a contract describe the duties and obligations between the college or training provider and the awarding organisation. It gives providers the opportunity to expressly detail their requirements and expectations from the service they are purchasing from awarding organisations.