They’re flavour of the year, supposed to reduce tendering costs and hassle. But the reality is that supplier panels often don’t work well for either agencies or suppliers. However, a new model developed by Clever Buying for Horizons Regional Council provides a solution that works well for everyone.
Supplier panels enable an agency to select from a pre-approved list of suppliers. Yet, although they’re designed to streamline procurement practices, the model often doesn’t deliver on its promise. In the worst cases, supplier panels add complexity and costs. They incur delays for suppliers to respond to lengthy questionnaires and tender evaluators to score, rank and select suppliers. And they then repeat the process with new attributes and pricing required when work needs to be allocated.
Once on a panel, suppliers complain that all that time and effort is worth nothing, as they don’t get allocated any work. And councils find that promises made in those lengthy supplier submissions are not always tracked or kept. For them, it’s often no easier to get good performance on contracts than it used to be.
The challenge that Horizons Council faced with its previous supplier panel was that work allocation was a somewhat haphazard process. Although most of its panellists were known to council’s area engineers and had met their basic requirements – such as having a health and safety (H&S) system and insurance – some panellists ended up with more work opportunities than others.
Council wanted to make the process of work allocation more consistent and transparent. At the same time, it needed a contract management system that would track and reward its best performers in a consistent, fair and well-managed way.
The contractors also wanted a simple and user-friendly process for getting onto the panel, that would not involve a mountain of paperwork. Once they were on the panel, they also wanted reasonable assurance of regular work, to make their efforts in getting on the panel worthwhile.
A joint effort
Horizon’s team of area engineers worked with Caroline Boot and Donna Smithies from Clever Buying to find a solution. The crux of the workshops was, first, to identify the minimum standards needed for suppliers to be on the panel. Second, everyone needed to define clearly what qualities would push a supplier to the front of the queue to be rewarded for great performance.
Early on, the combined team established that within the river management area, there are two types of work that need to be done: routine scheduled maintenance work, and unscheduled reactive or emergency works.
The key to success of this model was simple: every contractor who qualifies to be on the panel will be offered routine work in their area in turn. Then the best performers on those jobs will be offered opportunities for additional work, based on their audit scores.
But the effectiveness of this model doesn’t stop there. Importantly, both the initial panel selection process and the performance management system were carefully designed to be as streamlined as possible – cutting out time-waste and paperwork for both contractors and council.
The supplier panel selection process then interfaces neatly into council’s contract management system, making the end-to-end work management process simple, streamlined and consistent throughout.
Appointing a panel
To get on to the panel, suppliers only need to provide simple evidence: health and safety certification, evidence of insurance, a good track record in their core work type, and relevant certifications.
There’s no long-winded paperwork to prepare, no lengthy and complicated scoring from evaluators, just a simple pass/fail on seven core factors. A referee phone call provides the evidence that work has been done to a satisfactory standard in the past. And the health and safety requirement could be fulfilled by any reputable third-party H&S certification, or alternatively, by council’s own accreditation system.
The process of applying can be done easily in an afternoon; and the process of checking an application for compliance can be done in minutes. The simple, streamlined nature of on-boarding to the panel will make the panel appointment process fast and easy for all parties.
Daily plant hire rates are also asked for, but these are not scored. If a daily rate is significantly more (or less) than others in the same area and work type, then naturally, questions will be asked. But, for the most part, price is not a key decider of who gets on the panel or even, who gets allocated the work. Rates can be adjusted annually, or if unexpected cost factors (such as fuel taxes) are imposed which will impact on the profitability of many suppliers.
Once the panel is in place, council’s system identifies which suppliers can undertake each of the 16 specific work types covered, in each of Horizon Council’s seven areas. The routine planned work in each area will be offered to each of the local contractors on the panel in turn. Where possible, there will be ample prior warning of routine work so contractors can schedule it when they’re not flat-tack with other jobs.
This will smooth workloads, allowing better planning and resource usage, and boosting panellists’ confidence in their pipeline of work. Council will have the benefits of a well-qualified workforce on tap.
Getting the job done will be simpler, faster and less hassle than in the past – but equally importantly, both council and its suppliers can rest easy that everybody who qualifies to be on the panel will be offered their fair share of the available scheduled work.
The icing on the cake, however, is the simple but effective performance recognition system that comes with this model.
Every job will be checked by the area manager, who will assign a simple traffic light rating, based on the contractor’s efficiency, quality of workmanship, environmental and safety performance, availability, quality of paperwork, cooperation with landowners and council, and commitment to staff training.
If any of these areas is identified with an orange or red light, the area manager will let the contractor know what improvements are needed on the next job, to address the issue.
An independent council administrator will complete a more formal audit of every third job or every three months (whichever is sooner). Area managers will be interviewed to identify any performance issues and to rate the contractor’s overall performance. The interviews will be carefully structured with performance benchmarks, so that supplier performance is consistently scored across the different work types and regions.
Contractors with the highest performance scores will get first option for additional capex, emergency or non-routine work. The annual expected budget for that work will be around $1.5 million – a good incentive for council’s trusted panellists to aim high.
Like the process for panel application, this process will be simple to administer, fair and user-friendly.
Strong support from contractors
Clever Buying’s Caroline Boot joined council’s area engineers to run several briefings for suppliers in July, in Kairanga, Woodville and Marton. The briefings were advertised in local papers, as well as by email and snail mail to existing known suppliers, and notified to members of Civil Contractors NZ.
The new model was strongly supported by those who attended: “We normally dread coming to briefings like this”, commented one contractor. “This is going to make working for council easier, less hassle and more attractive.”
Horizons Council’s group manager for river management Ramon Strong is delighted at the strong interest from suppliers: “The new plant and machinery panel will make our work allocation and contract management processes fairer, more consistent, and more easily tracked. We’re keen for all able contractors in our region to have a slice of council work, and we’re looking forward to rewarding our best performers.”
This model has great potential for other councils to follow, to streamline their procurement processes for smaller and regular work, reduce the time and costs involved in tendering and contract management, and make council work more attractive to contractors.
This article was first published in the October 2019 issue of NZ Local Government Magazine.