Contracts, agreements and tendering

Transcription

1 Contracts, agreements and tendering 1) Introduction This guidance note provides an overview of the types of contracts and other agreements you might need to use in setting up and running a local energy efficiency project and some of the processes involved in procurement and commissioning. Although highlighting the key contractual issues and processes to be aware of when buying, selling or establishing partnerships, it is not intended as a substitute for reading the small print on any agreement you are entering into, or for taking proper legal advice where required. Where appropriate, this note provides references to further guidance and boilerplate legal documents available from a range of sources. At a very basic level, users of Microsoft Word can access a suite of template contracts for services, consultancy and employment by using the new document function. More tailored professional support and advice may be available locally, for example through local support organisations for the voluntary and community sector, or Chambers of Commerce. It should be noted that a range of specific requirements apply to all Green Deal or ECO installations and funding. These are set out elsewhere in the PlanLoCaL resource pack and should be read alongside this guidance if you are setting up a local Green Deal or ECO scheme. 2) Why do we need a contract? A contract is simply an agreement to do or provide something in return for something else (usually financial compensation). So, in legal terms, any formal purchase (or sale) involves a contract, whether you re buying a new cartridge for your printer or bulk-purchasing insulation materials for installation in local homes. As the value or complexity of the goods or services being bought or sold increases, so does the risk if something goes wrong, e.g. the goods turn out to be faulty, or the service falls below the expected standard. And as the risk to either party increases, so does the need for a more detailed contract or sales agreement to protect their interests. So, for example, if you are buying in services from a local contractor such as loft clearances, home energy audits or building work, then having a contract or agreement will be important. Insisting on a contract with a new customer or supplier may be seen as burdensome, or even to imply a lack of trust. For many the apparent complexities, not to mention the possible cost, of taking a legal route can be off-putting. But drawing up a robust contract does not have to be expensive, time-consuming or complicated, and doing so should provide the basis for trust by helping to protect the interests of both parties. As many in business have discovered when things have gone wrong without a contract in place, the alternative can be very costly indeed. continued...

2 3) What makes a good contract? Whether you re buying, selling or establishing a partnership, there are certain qualities that are desirable in any contract. A contract exists for the benefit of both parties (e.g. to avoid disputes and minimise the exposure to financial risk) so it s important that it sets out clearly and in plain language: who the parties are; what is the product or service that forms the purpose of the contract; when the product or service is to be delivered and if applicable over what period; how it is to be delivered and for how much. It should also be concise, easy to understand and flexible enough to allow for variations if circumstances change. Putting together an effective contract The following general guidance on putting together an effective contract has been published by the National Council for Voluntary and Community Organisations (NCVO). Although aimed principally at charities looking to be commissioned for the delivery of public services, it s equally applicable to other not-for-profit organisations, and for purchasing as well as supply. When considering the contents of a contract, there are certain questions that you should ask yourself in order to ensure that the contract will be fit for purpose. What are the key clauses? There are a number of standard clauses (also known as boilerplate clauses) in a contract that will change little between different contracts. The most significant clauses for you are likely to relate to price, term, risk and liability, indemnities, variation and termination. In any event you should read through any contract carefully from start to finish in case there is a term included that could have a substantial impact on you or the delivery of the contract. What issues should you watch out for? Key issues to look out for will generally involve the allocation of risk and liability, i.e. what the cost will be for you if something goes wrong. There may also be specific onerous requirements in relation to, for example, the management staff requirements, variations or giving notice to terminate the contract. What has/has not worked for you in the past? Here are examples of other commercial issues to watch out for that you may not have considered and that could be addressed within the contract to clarify each party s position: Process for variation/changing the contract Warranties and indemnities Insurance Intellectual Property Rights Sanctions and termination. Further guidance on these issues is available at:

3 4) Buying goods or services If you are buying a large item of equipment or some form of professional or technical service, you may want to start by inviting quotes or tenders based on your specification so that you can review a number of competitive bids and decide which supplier offers the best quality and value for money. Once you have decided on your preferred supplier, you may need to negotiate over elements of your specification, for example if the successful bidder puts forward an attractive alternative proposal. Together with a set of legal terms and conditions, the agreed final specification or schedule of works (including the detailed scope and standard of work to be delivered, timeframe and costs) then forms the basis of your contract. Further guidance on procurement by competitive tendering is provided in the box below. Most installers and other suppliers are likely to have their own standard contracts so you may not need to start from scratch creating contract agreements. In this case, as well as checking your specification is being met, you should focus on the small print, paying particular attention to warranties, insurance, liability and who pays if something goes wrong. However, it s important to remember that as the customer you are in a strong position to insist on particular levels of service, or other terms and conditions. Indeed you may want to draft your own standard contract which can be cross-checked with any contract presented to you by a supplier, or adapted for use with different installers if you feel it s more appropriate to apply your own terms and conditions. Procurement through tendering Before you start Right at the outset, agree on exactly what it is you wish to procure and what your limitations are in terms of maximum spend, timeframes, etc. in order to develop clear tender documents Specify your requirements: This could include the background to the project, aim of the work, outputs required, scope of the activity, delivery methods (if appropriate), dates, timeframes and geographical locations or target audience Set out how tenders should be submitted: For example: the format (hard copy or by ); use of a template; maximum number of sides or word count; what questions or headings to respond to; use of appendices for additional information. Make sure the closing date (and time) for submitting a tender is clearly stated, as well as the address tenders should be sent to Selection criteria: Agree, and if appropriate publish selection/pre-qualification criteria in advance to ensure that it is a transparent process continued...

4 When inviting tenders: The tender process should be clear from the start. Here are some useful pointers: Prepare and publish tender notices/advertisements; issue invitations to tender Open tenders on a specified date and time and make tender documents available together with other supporting information and selection criteria Explain the process for awarding work and any requirements the contractor needs to be able to commit to should they be successful Invite tenders from enough suppliers to ensure there is adequate and genuine competition, at the same time restricting the field to those who have the ability / expertise required and have a reasonable chance of success Make sure that procedures and documentation are clear and concise, and only ask for information necessary to base your decision on (otherwise the process might become unwieldy for all parties) Treat all suppliers in the same manner, providing all parties with the same information and opportunity Assessment process: You can use a one-stage or two-stage assessment process. A two stage process could include an initial selection (or pre-qualification ) of candidates followed by a tender stage (using pre-agreed Award criteria). Either way, you should agree a set of criteria against which to assess applications, either as a checklist or a matrix and then follow these steps: Evaluate tenders against pre-agreed selection criteria Notify successful and unsuccessful bidders in writing as soon as a decision is reached Write an intention to award contract and / or sign off contract documentation Keep records throughout so as to ensure a full audit trail Assessment criteria: These will depend on your specific project and might be weighted to reflect your priorities. Criteria could include: Value for money over the lifetime of the contract Cost and quality of work Relevant knowledge and experience Ability to work with community group Examples of work / recommendations from previous customers Understanding of overall project aims Sensitivity to target group / work area Suitability of proposed approach Clear outcomes

5 5) Providing goods or services As well as buying in goods and services (e.g. from installers), it s likely that any community group involved in delivering energy efficiency improvements in their area will also be acting as a supplier. Examples could include: Offering free energy efficiency improvements to home owners in your area (such as solid wall insulation or boiler upgrades), having secured a grant or other funding to pay for goods from a manufacturer or for services from an installer Setting up a company, co-operative or social enterprise and selling a service or product to customers (such as energy auditing) In any of these cases, you will need some form of contract (e.g. a Service Level Agreement or Customer Agreement) to set out what goods or services you are expected to deliver and by when and what you can expect in return from the customer, most importantly payment. Remember to be absolutely clear about what you are offering a customer and what is required of them, and to clarify insurance, VAT etc. as appropriate. When dealing with individual households, a simple customer agreement might be the best approach. This can also be used to collect data on the building type and any other personal information that needs to be recorded, e.g. as a condition of grant funding. Some of the key points to include in a customer agreement are shown at the end of this document. If you re looking to provide a professional service to another organisation (e.g. energy auditing to a local housing provider) it s likely you ll need to submit a competitive tender. There are a number of important issues you should consider before committing resources to any tendering process, for example: Do you have the capacity to deliver the work if you win the contract? Is the work aligned with your mission and strategic plan? What will be the impact on your existing work? You should also bear in mind that an accepted bid can form a legal agreement, so you should only proceed if you can ensure your bid is realistic and appropriate. NCVO has published a useful checklist of things to consider before bidding for any contract opportunity: The tendering process you re asked to follow may vary significantly depending on the size of the contract and the nature of the client (e.g. public or private sector). For some large public sector contracts, the process may consist of several stages beginning with an Expression of Interest (EOI) designed to enable the commissioning body to draw up a shortlist on interested and eligible potential bidders. Only those potential suppliers that meet certain criteria are then invited to submit a tender by mean of an Invitation to Tender (ITT). The box below sets out some key steps to follow when preparing a competitive tender. Whatever the outcome, make sure you ask for feedback on your bid so you can learn any relevant lessons for the next time.

6 Bidding for work by competitive tender In general terms, once you ve decided that you want to bid for a piece of work and have established that your organisation is eligible, there are several key steps to follow in preparing your tender: i) Take care of the practicalities Establish who s going to lead the tender process and allocate tasks to other members of the team Create a project plan and/or tender checklist to ensure everything gets done well before the deadline Make sure you understand what format the bid needs to be in and how and when it should be delivered. ii) Analyse the specification Understand the background to the tender, i.e. why is the work being commissioned? Make sure you understand the requirements, e.g. what are the deliverables and timescales, and are these achievable? What are the risks? iii) Do your research, test and refine your ideas Build up a clear picture of how you would deliver the work in question, drawing on your own experience and other good practice Consult on your proposed approach with relevant stakeholders and if necessary test out your ideas in practice before refining them iv) Gather your evidence Organise the evidence of your relevant skills and experience with reference to those set out in the tender specification Make a list of all the relevant supporting documentation that you may need to provide (e.g. recent financial accounts, insurance policies, testimonials from past clients) v) Construct your bid, including a detailed budget The amount of work involved in actually writing a tender can vary hugely depending on the commissioner s requirements. Make sure you provide all the information requested and follow the required format. Focus on the intended outcomes, describe your approach for achieving these and detail the resources you will bring to the work and the costs involved. In estimating your price for the work, make sure you cover all your costs, including overheads. Remember that your tender documents may form part of the contract. There may be no further opportunity to re-negotiate what you have submitted. vi) Check and re-check Make sure your bid provides all the information and supporting evidence requested in the tender and makes the most of the relevant skills and experience in your organisation. Will the budget cover all your costs and does it include VAT where appropriate? These steps are adapted from guidance publishes by NCVO (see

7 6) Brokering, or making paid referrals for goods or services If you are acting as a broker (e.g. engaging householders and referring them to an installer) then a customer agreement, expression of interest, or sign up form could be a valuable tool, both in terms of quantifying demand, and in setting out costs, timeframes and any eligibility requirements. A customer agreement or sign up form will make it clear what is on offer to the householder, whilst an agreement with an installer or service provider will set out details of what they will pay you for and the way they will pay you. There is more information in the local installer networks resource on different types of referral arrangements that you could set up with an installer or service provider under a local scheme. 7) Partnership or joint working agreements It might be helpful, e.g. when effective project delivery or development of future opportunities relies on close collaboration with another organisation, to enter into some form of partnership or joint working agreement. This may be formal (i.e. legally binding) or informal depending on the level of risk involved to either party and may take one of several forms including: a formal partnership contract or joint venture agreement where two organisations are committing to share the risk involved in delivering a project or developing a new initiative a Memorandum of Understanding (MoU) providing a more general statement of intent of how two organisations will work together on an area of shared interest over a period of time. Organisations can work together in a variety of ways from informal networks to joint delivery of projects, and for a range of purposes. Therefore the content of any joint working agreement should be tailored to the specific needs and circumstances of the collaboration it covers, taking into account the needs of the partner organisations. Some agreements will create enforceable rights and obligations and others will not. In particular, the word partnership itself has a specific legal meaning and so should be used with care in any written agreement. Professional legal advice should be taken where necessary. Further advice on joint working agreements for community groups is available at:

8 Customer agreement points to include i) Overview of the group and the project Group or project name, contact details, date, reference number. ii) Details of the project, what is being offered and how it will run Project dates, funding and finances, local benefits, any endorsements and/or accreditations that are relevant. Full information on any payments or costs the customer may be required to make and any requirements they will need to comply with. iii) Customer contact information and personal details This may include details of the customer s income level, benefits and other information if you are accessing funds targeted at specific groups of people. Name and title, date of birth, address, post code, local authority, phone (home/work/mobile) Owner occupier / private rented / housing association or council tenant Benefit details (if applicable); income level (if applicable) iv) Building type If you are collecting data on the local housing stock, or if the service being offered is specific to certain buildings, you may need information about the property: Property type, age of building, number of bedrooms, heating fuel, heating type, loft insulation depth, wall type v) Customer declaration Some or all of these statements may be relevant to a customer agreement: I declare that to the best of my knowledge the details provided in this form are correct I confirm that I am a resident of [specific area if relevant] I confirm that I am the owner occupier of the property at the address detailed above I understand that by signing this form I am agreeing to [insert details as appropriate] I understand that any costs associated with use of equipment, repair work or ongoing maintenance are at my own risk [...insert details] I understand that I will be required to pay [insert details] I agree to the use of my data in accordance with the data protection statement below vi) Customer signature It is essential to have a printed name, a signature and a date on the agreement. vii) Data protection statement Insert details of exactly how you intend to use the information in this form including how it will be stored, who it will be shared with. You may need to register with the Data Protection Authority if you are storing customer records.