3.30 Authorities often went to substantial lengths to verify the cost basis of changes wherever possible. Where substantive changes were made to the deal during preferred bidder negotiations, Authorities used a variety of methods to try to check the costs involved:
■ strong reliance on advisers, both to conduct financial assessments or benchmarking exercises and to ensure that the preferred bidder is not asking for something that will prejudice the Authority;
■ the agreement of the second placed bidder to act as a "reserve bidder", ready to step in if there are difficulties with the preferred bidder negotiations (Box H). However, this strategy tends to lose credibility after a few months as a reserve bidder is unlikely simply to accept the result of all the negotiations between the Authority and the preferred bidder; and
■ the use of "should-cost" models, the Public Sector Comparator or internal benchmarks to assess any changes proposed by the preferred bidder.
BOX H |
Maintaining competitive tension during preferred bidder negotiations: the case of Docklands light Railway, extension to Woolwich "The preferred bidder decision to financial close took 5 months. This was achievable partly because of clarity over what was wanted and partly because of a determination to stick to timetable. The preferred bidder appointment was dependent on the bidder adhering to a clearly defined set of conditions, including a requirement to keep to timetable. If the preferred bidder failed to meet these conditions, TfL retained the effective right to reverse the appointment." |
3.31 Despite the variety of methods used to check the basis of costs, there was near universal agreement amongst Departments and advisers alike, as well as from several public sector procurement teams, that such methods could not guarantee value for money. The fact that advisers made this point was particularly significant, given the reliance placed on them by procuring authorities. In the absence of competitive tension, the only way for Authorities to maintain value for money is to avoid changes to begin with.