Your questions answered

Supplier Gollnsion * Helping the sales department with tenders

Collusion course

Q Following a recent tendering exercise we suspect that supplier collusion has taken place. We are governed by European Union procurement directives and need to establish a formal contract, but we are now reluctant

A Eric Evans, director of Eric Evans & Associates, writes: Supplier collusion is more common than many buyers realise, but as I am sure you are aware, that there is a major difference between suspicion and proof. There are a number of courses of action open to you.

Under EU law, you have the right to refer any breach of EU competition rules (article 81) to the European Commission. The reality behind this option is that the community competition law enforcement is under-resourced, and therefore unless you have strong evidence and the matter involves breach of fundamental issues or significant sums, it is unlikely that this option will lead to real or substantive action by die commission. This may be a problem if you cannot afford to suspend the contract award.

It is likely that a practical solution will be of more interest to you. A straight re-tender is unlikely to achieve a significantly different outcome, and therefore you need to consider how to vary the procedure you use.

While working as director of procurement for the NHS a few years ago, we had a similar problem with a tender under the restricted procedure rales. The advice we were given by die EC's competition directorate (then known as DGIV) was that "in the case of irregular tenders in response to an open or restricted procedure, it was acceptable to use the negotiated procedure". This allowed us the flexibility to pick the supplier we thought was most amenable to a negotiated solution and to deal as we thought best.

To be safe, we met with all of the shortlisted bidders, explained that we had a suspicion that some bidders were engaged in collusive practices, and asked each of them to sign an indemnity to the effect that they understood there was suspicion of collusion; they warranted that they were not involved in any collusive practices; they would be happy to confirm this to any subsequent legal enquiry, and would also support the use of the negotiated procedure as a way of resolving this issue.

We also comprehensively documented our suspicions and our actions in case die commission asked us to explain the course of action we took.

After discussing your problem with my colleagues, I have been given two further solutions to similar problems. In one, a client's organisation re-tendered but this time used an open instead of a restricted process, as a way of opening up the competition to a wider supplier base.

In another, a client retendered using a restricted procedure but changed the "economically advantageous criteria" to include factors such as "willing and able to demonstrate not in collusion" and "prepared to use open-book methods to justify initial price and price movements".

Tender sales talk

Q Our sales director has asked my purchasing department to get involved with the more significant tenders leaving our business. Is this something we should do and what can we bring to the process?

A Stephen Ashcrofi, business consultant at Brian Farrington, writes: Yes, you should get involved, as purchasing could make a significant contribution to die quality of tenders leaving your business. The skills and knowledge required already exist in your department, which regularly analyses tenders received from a wide range of suppliers.

First, you need to establish precisely what your sales director has in mind. Sales timescales may conflict with your purchasing priorities and these would need to be made clear at the start. There could be issues regarding the quality of documentation, response to technical points and commentary on terms and conditions of contract.

Procurement best practice suggests that your sales department's tenders are being properly considered at the other end. Of course, that may not be die case, but a positive assumption should be made that professional people will evaluate the tenders. With this in mind, it is a good idea to analyse the impact of the tender if your department received it.

The sales-purchasing relationship can work very well. One example that comes to mind was a client tendering for defence work in die United States. The contractual terms and conditions tabled by the US Department of Defense (DoD) were based on the Uniform Commercial Code and the laws of a specific state, requiring detailed legal research.

The ideal position commercially was that purchasing communicated the DoD terms and conditions to the suppliers. On previous occasions, the sales department had issued invitations for suppliers to submit quotations. This was taken over by purchasing, strengthening the approach to managing contractual risk and obtaining realistic prices and other information from suppliers.

There was also a specification which required testing to be undertaken in DoD approved facilities. The purchasing department was able to arrange the logistics of this process, ensuring that realistic lead times were included in the tender.

When the sales department has produced the final draft of die tender, purchasing could run a critical eye over the detail. In this sense, the purchasers would be performing their usual role as tender evaluators. If the client has made known their evaluation criteria, the purchasing team can "mark" the tender as though they were the recipients.

Another area you can help die sales department with is identifying likely areas for negotiation. Beyond advising on the tender, you may be able to offer "dry runs" on negotiations. This action would considerably strengthen the relationships between the two departments and you will probably find that your own invitations to tender may be enhanced.

Please note: responses can only be given on this page, represent writers' personal views and should be regarded as general guidance only.