The heart of any contract is the specification of the service required. The real challenge for the purchaser is to lay down in writing who does what, for whom, when, at what cost, how performance and changes will be managed and what happens if (or, rather, when) things go wrong.
Establishing the base
First, you must be absolutely sure that you know what you want. The root of so many contract problems lies in the inadequate preparation of specifications and the failure by buying organisations to get to grips thoroughly with what is really needed. To do that you must understand:
- the user’s business and needs
- who else is involved
- Who else needs to contribute to the preparation of the contract
- the standards of performance that will be acceptable
- the constraints that must be considered
- who needs to participate in the continuing management of the contract
- what represents value for money
Value for money is not simply a question of taking the lowest price, but of assessing the right balance between what is paid for a contracted service and what is delivered by that service. As John Ruskin said: ‘It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought is incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is as well to add something for the risk you run and if you do that, you will have enough to pay for something better.’ (Ruskin died in 1910.)
The contract price is only one aspect of the cost of contracting a service, and simple performance is only one of a range of factors by which value for money is judged. Other factors are service quality, meeting operational targets, confidence and the relationship between the parties.
Furthermore, value for money can only be expressed as a judgement at the tender and contract award stage. It can be demonstrated and proved only over the full term of the contract, which will range generally between three and 10 years, and in some cases will be longer.
As a facilities manager you will be well aware of the range of support facilities you have to manage. But how clear are you about the real business needs of your clients within your organisation? What exactly do the users want and need to support their core business activity? How much do the users know and understand of the constraints under which you have to work to provide the support services?
These are the fundamental factors that you and your clients must deal with before you can be certain that your requirement for the contract service is realistic in terms of matching service to business need within the budget and resource constraints that will govern its delivery. Within this understanding process there will arise irreconcilable difficulties and the need to compromise, but it should result in both you and your clients reaching agreement on what you should be seeking from industry. If you are clear about what you want, you stand a good chance of making it clear to the contractors you are going to invite to tender.
But if you are uncertain you will find yourself in a contract that does not deliver what you need without substantial variation and clarification. All of that will make demands on your management resource which you cannot afford to meet without sacrificing some other part of the job that needs your time and attention.
Tender specification
Don’t try at this stage to write a contract specification. For tender purposes you need a clear statement of:
- what you want – outcomes
- when and where you want it
- the standards to which it must be delivered
- the means by which you need delivery demonstrated
Remember, you are tendering to ask professional and expert providers of services to show you how they propose to achieve the outcomes you want and how they will price that. You want them to demonstrate in their tenders the methods they will adopt and the resources they will commit to achieve effective delivery against your required outcomes. For example, don’t tell them to vacuum carpets every day and shampoo them every month. Tell them instead that you want carpeted areas clean; describe what you mean by that and specify the times at which that standard must be achieved (eg at 8am every work day). This is the tender specification. After the tenders have been evaluated you will negotiate and agree with your selected contractor the details of the contract specification.
The root of so many contract problems lies in the inadequate preparation of specifications and the failure by buying organisations to get to grips with what is really needed.
Specification structure
The specification is a fundamental part of the total contracting process, containing the means by which:
- contractor proposals are framed, and then evaluated
- the contract performance will be measured and managed
- contract changes will be managed
It is therefore vital that the structure of the specification is considered carefully and that the process of specification writing is understood and effectively managed.
At the tender stage requirements should always be specified in terms of outputs that can clearly be quantified in terms of method, resource and cost. The process must be undertaken as a team approach to ensure that the needs of everyone involved in the contract process are properly understood and defined. There must be clear ownership of the specification as being truly representative of the customer or user needs. Purchasing organisations must always be prepared to use the experience of others in writing specifications. This entails liaising with like bodies and considering issuing draft specifications to industry for comment and suggestions as part of the pre-qualification process to select tenderers or a contractor with which the purchaser will negotiate.
Specifications must also take account of the evaluation process that will be employed, in terms of evaluating either competitive or single tender proposals. Including evaluation criteria in a structure helps the bidder(s) construct their proposals.
It is thus possible to get proposals drawn up to cover technical, operational, management and commercial evaluation criteria.
The specification should cover:
- Introduction – a brief statement identifying the client and the background to the requirements of the project
- Contract term – how long you expect this to be and what provision will exist for review and extension, etc
- Contract management – an outline of how you expect the contract to be managed and inviting more detailed proposals from the tenderers
- Scope – what service is required
- Detailed requirements – the performance targets, outputs and standards that are required
- Operational matters – the operational needs of the client that might constrain the contractor’s freedom to perform under the contract, eg times of the year when building operations can be permitted, etc
- Special conditions – the particular operating requirements that will govern the contract
- Change control – how changes to the contract will be managed
- Method statement – requiring tenderers to submit detailed method statements to demonstrate how they will achieve the performance targets
- Programme – requiring tenderers to submit programmes showing key milestone dates, etc
- Compliance – statements on health and safety policy, etc
- Information – outlining the management information you will expect as a minimum and inviting tenderers to submit alternative proposals
Source
The Facilities Business
