Contracting

1 Aim and purpose

1.1 The aim of this Contracting Code of Practice is to ensure that Newcastle City Council (the council) and the voluntary and community sector (VCS) understand how the council’s Procurement Procedure Rules (PPR) can be effectively used in the processes around contracting services by the council from the VCS.

1.2 The purpose of this code is to set out the mutual responsibilities of the council and the VCS. To do this it sets out the undertakings given by the council and by the VCS in respect of contracts.

1.3 This code should be read with reference to the council’s Procurement Procedures Rules (PPR) set within the council’s Financial Regulation No. 8.

2 Contracts

2.1 A contract (*) is a legally binding agreement setting out the arrangements whereby one party provides a service (or goods) to the other in return for payment.

(*) Definitions of 'contract' and 'contracting' are given in appendix 1: glossary of terms.

2.2 The council will make it clear where contracts are being offered and whether these contracts are intended to replace (in whole or in part) existing grant funding arrangements. The VCS will be able to access this information.

2.3 Where contracts are offered the council will clearly identify the essential features. In this way, VCS organisations will be able to understand the contract terms and conditions and recognise how they differ from any previous arrangements.

3 Contract application and tender process

3.1 Contracting involves the process of inviting, applying for and assessing contract applications and tender bids and giving notice of decisions. The VCS recognises that contracting is a competitive process and that more than one group may be expected to tender. The VCS recognises that the final decision is the council’s. VCS organisations undertake to have clear lines of accountability and will properly allocate costs.

3.2 VCS organisations should be allowed enough time to make well-informed and considered tenders. The length of time allowed will depend on the size of the contract.

3.3 The VCS needs to be aware of contracting opportunities and should understand the timescales and decision making process. When applying for contracts, VCS organisations undertake to make sure that:

they meet the qualification criteria for the contract
their work would meet the aims of the contract
they understand the requirements of the contract

Contract pricing

3.4 Any tender starts with the proper pricing of contracts. The price states how much the organisation wants for providing the goods or for delivering the service. This is something that only the organisation can decide.

3.5 Tenders will cover costs over the lifetime of the contract. This will be within reasonable tolerances to be agreed between the council and the VCS. Tenders will take into account efficiency savings and state these explicitly.

Access to contracting opportunities

3.6 To promote fair access to contracting opportunities the council will produce a guide to the council contracting process, including how procedures are managed, the policies that underpin them and information on how challenges to decisions may be made.

3.7 The council will make details of the contracting process widely available through umbrella organisations, networks, directories, newsletters and the internet. They will ensure that guidance notes and application forms are readily available to applicants. Where appropriate, they will provide information in Braille, large typeface, audio, and in languages other than English.

3.8 The VCS recognises the need to comply with the qualification criteria to tender for contracts, and in this context will:

have clear and effective management policies and procedures
have the required systems for monitoring, quality control and audit
have a good understanding of, and ability to calculate, the full cost of delivering a service
recognise that contracting is a more rigorous undertaking than grant funding, requiring more robust systems of management, quality control, and reporting

Equality and consistency in tendering

3.9 The council has a legal obligation to provide a ‘level playing field’ for all potential providers. This includes making no special provisions for VCS organisations. At the same time, the council will take all reasonable steps to ensure that tendering and contract conditions do not disadvantage VCS organisations compared to others.

3.10 The council will ensure that it maximises the opportunities for VCS organisations to tender for contracts by:

taking a consistent approach to contracting across directorates that meets the requirements of the Compact and its codes of practice
actively promoting contracting opportunities in the VCS by making use of existing networks within the VCS etc
working to develop a simplified pre-qualifying questionnaire (PQQ) or ‘passport’ for smaller organisations.

3.11 Contracting directorates will endeavour to prepare service specifications that do not deny opportunities for VCS organisations to engage in the contracting process.

3.12 VCS organisations undertake to only bid for contracts where they know they are fit for purpose.

Transparency

3.13 The council will ensure that the contracting process is open and transparent, see PPR section 5.2. This will allow the council and the VCS to learn from previous work.

3.14 The VCS recognises that public accountability requires reporting to ensure clarity about the use of funds and what they have achieved. The VCS undertakes to be honest and transparent in this regard.

Contract value bands

3.15 The council has different procedures for different contract values. These are currently:

Delegated officer can place a direct order - less than £5,000
Minimum of 3 minor quotations, can be oral or written - £5,000 up to £20,000
Minimum of 3 written quotations - £20,000 to £139,893 (amount applies 1 Jan 2008 - 31 Dec 2009)
Minimum of 5 full tenders i.e. EU rules - over £144,371.

Details of these different approaches are given in the PPR. The council reserves the right to change the PPR and hence these procedures. It undertakes to notify NCVS of all such changes.

VCS organisations will make sure they are familiar with the rules and procedures applicable to particular tendering opportunities before they apply. The council will seek to provide clear, accurate and full information on request.

Approved lists

3.16 In a limited number of council directorates there are approved lists. Where these exist, the council will ensure that the procedure for organisations to apply for inclusion is clearly decsribed and is accessible to the VCS. This may include public advertisements.

Negotiating contracts

3.17 Contracts will not normally be negotiated. However, if considered to be in its best interests, the council will negotiate contracts in accord with PPR section 3E (*). The VCS recognises this procedure and its provisions.
(*) See appendix 2: contract negotiation route.

Contract duration

3.18 The duration of a contractual arrangement should be made clear at the beginning of the negotiating process.

3.19 A contractual arrangement is not an open-ended commitment to a VCS organisation. The contract is time limited and the council reserves the right to end the relationship. In every case, the contract will state clearly the circumstances under which the arrangement may be ended.

Extending contracts

3.20 Where it is possible to extend a contract beyond its initial period, this will be stated in the original invitation to tender. Any conditions attached to negotiating the extension will also be made clear at this stage.

4 Contract risk assessment

4.1 The terms of delivery will give clear expectations of what is to be delivered, the ways it can be delivered and by when. This will allow VCS organisations to plan and deliver effectively.

4.2 The council has a duty to set standards for risk assessment. Some of these may be legal or government requirements. VCS organisations will therefore agree terms of delivery at the outset, and be aware of the risks associated with failure to deliver the agreed outputs and outcomes.

4.3 In th e past, some VCS organisations have been unable to satisfy certain risk assessment criteria, e.g. the size of liability insurance and of financial reserves. The council undertakes to ensure that such criteria are proportional to the size and nature of the contract.

5 Financial considerations

VAT

5.1 The council and the VCS recognise that contracts buy a complete service and, as a result, attract VAT. Both will act accordingly.

5.2 VAT is chargeable on the supply of services. This occurs under a contracting arrangement. VCS organisations should be aware of this, especially when moving between grant funding and contracted arrangements.

Competition

5.3 The council has a duty to manage public funds effectively and must seek value for money. The lowest tender is not the automatic choice as factors such as service quality and overall value are part of the decision-making process.

5.4 The VCS recognises the competitive nature of tendering and the need to price a contract specification carefully. VCS organisations undertake to build their capacity to do this.

5.5 The council recognises that the VCS is competing with the private sector for contracts. Issues arising from this are addressed in a number of ways, for instance by offering block contracts at a price that applies for all, and through careful contract specification.

Timing of payments

5.6 The council recognises that it is possible for payments to be made in advance. (The rules governing this are set out in PPR section 7E).

6 Complaints about contracts

6.1 Complaints about the contract fall under the terms and conditions of the contract. They should be made to the relevant contracting officer.

6.2 Complaints about the award of contracts fall under the council’s corporate complaints procedure and should be made to the corporate complaints staff.

6.3 As stated at Section 1, 15.2, complaints relating to the provisions of the Compact and its codes are covered by the procedure outlined in the Compact document ‘Procedure for resolving disagreements’ (July 2005).

7 VCS involvement in the contracting process

7.1 Contracting is a process where the expertise, skills, knowledge and professionalism of all parties should be utilised. Where their expertise is important, organisations from all sectors may be involved in the design of a service. Where the expertise of the VCS is key to achieving the best design for the service, the council will seek to use this expertise in helping to design a particular process.

7.2 The council and the VCS agree that, other than the two exceptions set out below, service providers cannot stand on both sides of the same process. This means that they cannot be involved in both the design of the contracting process and in the tenders that result. The only exceptions to this are where:

a) There is only one available provider of the service in question and as a result the council intends not to have a competitive procurement but instead negotiate a contract solely with that provider. In these circumstances the council may take into account any advice given by that provider during such negotiations as to the appropriate terms or specification for the contract; or where,

b) The most appropriate source of advice reasonably available to the council in relation to designing the contracting process are those organisations or other persons who will be invited to bid for the contract. In this case, the appropriate potential bidders will be consulted about the matters upon which the council requires advice. After taking into account all such representations received, the council will design the contract in a way they consider to be in the best interests of the council with respect to the end users of the service.

This agreement stands in addition to the requirement for all conflicts of interest to be declared in good time and in the proper way.

8&n bsp;B uilding capacity

8.1 For many VCS organisations, contracting is a new arrangement and one they may find threatening. Both the council and the VCS recognise the need to build capacity and where possible give reassurance.

8.2 The VCS will seek to develop and extend existing services that support VCS organisations engaging in the contracting process. This could include:

sharing r e sources and expertise in areas such as legal advice, accounting, personnel procedures etc
supporting smaller organisations that wish to pursue contracting opportunities
promoting the better understanding of models to engage in contracting on a joint basis e.g. through consortiums
working with the council, e.g. through the Sustainable Procurement Officer, to ensure that the specific needs of the VCS are addr essed in the council’s contracting arrangements.

8.3 When tendering for contracts, smaller VCS organisations should highlight their distinctive contribution.

8.4 The council and NCVS recognise the need for more training on contracting processes, contract culture and tendering. The council and NCVS will explore how this may be provided.

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