Construction procurement guide: selective tendering

Updated: 1 Jul 2008

Guidance on how to select tenderers for construction work or consultancy services under a prequalification scheme.

Purpose of the guidelines

Guidance is provided for:

the selection of tenderers by members of a tenderer selection committee and the subsequent confirmation of a tenderer panel
for agencies and their project managers for the selection of tenderer panels under a prequalification system, including for the selection of tenderer panels for construction contracts valued under $1 million included in projects or programs of work with a total end cost estimated at less than $1 million.

The guidelines apply:

under the NSW Government to selective tendering for construction contracts or consultant engagements
only for construction work or consultant services under prequalified construction contractors or consultants (including project directors and project managers).

For tenders for consultant engagements valued less than $50,000, the project manager or agency representative should follow local delegations and procedures for selection of consultants. Reference may be made to the relevant local tenderer selection committee for advice and support for such selections.

Definitions

Agency senior manager. Senior officer from the NSW Government agency responsible for the delivery of the project involving the construction contract or consultant engagement for which these guidelines apply.

Selection committee. Either a tenderer selection committee or a local tenderer selection committee.

Local consultant. A tenderer selection committee is entitled to use its judgement in selecting a suitably capable local consultant to perform work.

Composition of selection committees

Tenderer selection committee

The tenderer selection committee is responsible for the selection of tenderers for construction contracts valued at $1 million or more, or consultant engagements with an estimated fee of $50,000 or more, where such works or services are included in a project or program of construction-related work with a total end cost estimated at $1 million or more.

The tenderer selection committee involves a quorum of 3 including an agency representative and comprises:

Chairperson. the Senior Manager, Policy Support Services or a nominated representative.

Secretary. An officer of Policy Support Services.

Members. The following officers or their nominees who may participate:

one or more agency representatives (may include the project director or project manager or that person's delegate)
a senior officer with experience or qualifications consistent with the type of construction or service being procured.

The secretary of the tenderer selection committee provides support and advisory services, as detailed below, for the committee but has no determining rights in the selection of a tenderer panel.

The tenderer selection committee meets every second Monday and as agency demand requires.

An agency representative responsible for the delivery of the project may represent the agency responsible for the project on the tenderer selection committee.

If required by the agency, another agency representative not on the tenderer selection committee may also act as an observer or may put a submission to the tenderer selection committee but is not entitled to any determining rights in the selection of a tenderer panel.

For convenience, members of a tenderer selection committee may communicate by way of electronic media, such as by using teleconference or similar facilities.

Local tenderer selection committee

As soon as it is established that a construction contract (of estimated value less than $1 million and part of a program of construction-related work with a total end cost less than $1 million) is ready to go to tender and funds are available, a local tenderer selection committee is to be formed by the agency senior manager or relevant project manager or their nominee.

The local tenderer selection committee will comprise:

the agency senior manager or project manager’s representative or their nominee as chair
a senior officer knowledgeable and appropriately experienced for the type and estimated value of the work
a senior administrative officer experienced in the type of selection and support function required.

Code of conduct

Members of a selection committee are obliged to comply with the code of conduct.

The secretary maintains a register of all persons who have signed a copy of the code for tenderer selection committee meetings. A copy of the signed code is retained with the register for each person recorded on the register. A local tenderer selection committee should establish its own register.

The need for unbiased selection cannot be overemphasised.

Selection committee members rostered to attend a meeting, who are aware of any conflict of interest, including any personal or financial interest, no matter how remote, in the outcome of a tender process, must stand down from participating in that tender process until the matter is resolved.

This could include persons who will recommend or approve acceptance of the tender. An interest could include shareholdings in a tenderer under consideration by the member or member’s family, outstanding debt or personal animosity towards a tenderer.

A member that may have a potential conflict of interest in a particular tender process should abstain from that process.

The member should notify the person responsible for the selection process (for example for a tenderer selection committee, the person responsible is the senior manager, Policy Support Services) at the earliest opportunity.

The member may be replaced for the selection process or undertake a role that avoids the conflict. The nature of the interest need not be disclosed as members are entitled to confidentiality in this regard.

Information acquired in the course of undertaking the role of a selection committee member must be kept confidential.

Selection committee members must also be mindful of NSW legislation that bears on probity and fairness obligations in tender processes. Examples include:

the Fair Trading Act 1987 (NSW), an Act to regulate the supply, advertising and description of goods and services and, in certain respects, the disposal of interests in land
the Ombudsman Act 1974 (NSW), an Act to provide for the appointment of an Ombudsman, to define the functions of the Ombudsman and for purposes connected therewith which include dealing with complaints about the conduct of public authorities
the Government Information (Public Access) Act 2009, this Act is to open government information to the public by
- authorising and encouraging the proactive public release of government information by agencies
- giving members of the public an enforceable right to access government information
- providing that access to government information is restricted only when there is an overriding public interest against disclosure
the Independent Commission Against Corruption Act 1988 (NSW), an Act to constitute the Independent Commission Against Corruption (ICAC) and to define its functions which include the carrying out of investigations into complaints of corrupt conduct, whether any laws governing any public authority or public official need to be changed for the purpose of reducing the likelihood of the occurrence of corrupt conduct, and whether any methods of work, practices or procedures of any public authority or public official did or could allow, encourage or cause the occurrence of corrupt conduct.

Selection committee functions

Tenderer selection committee

A tenderer selection committee will meet on a regular basis, currently every Tuesday at 2 pm, to select the tenderer panels for works or services for which panels have been requested by submitting the form Selective Tenders – Select a tenderer panel.

Prior to a tenderer selection committee meeting, the secretary of the committee will produce reports from the contractor and consultant management system (CCMS) database showing, for each tenderer panel needed, those prequalified and capable of carrying out the work.

The reports will also show the past performance, capacities, current contracts, restrictions and past tender opportunities of the prequalified tenderers.

The tenderer selection committee is to identify the best tenderer panel to maximise the potential for optimum time, cost and quality results.

The tenderer selection committee is to ensure that those prequalified are selected and given opportunities to tender for work within their work or service category, geographic areas of operations and expertise, and to suit their relative past performance against applicable criteria such as:

management capability, technical coordination, physical and financial capacity and resources to undertake the work
record of performance regarding time, quality of work and other measured factors
contractual claims record and recent history of contractual disputation with the government agencies involved in the project
industrial relations, OHS, employee relations and service provider relations management performance
performance in tendering for contracts, such as whether the entity has previously accepted an offer to tender for a contract and failed to submit a tender
business location and involvement in the geographic area involved
recent relevant experience on the site of the proposed contract work
quality of business relationships with the agency responsible for the project and with the agency responsible for providing the procurement system
any specific request from the agency responsible for the project for selection of a preferred prequalified contractor or prequalified consultant.

When the value of a construction contract is $2.5 million or more, due to their proven performance and capability, contractors accredited under the Contractor Best Practice Accreditation Scheme should be given preference for selection over non-accredited prequalified contractors, particularly for projects to be carried out in the Sydney basin area.

Due to the limited number of best practice accredited contractors located in the regions outside of Sydney, tenderer panels for contracts valued at $2.5 million or more may be comprised of a mix of prequalified and best practice accredited contractors subject to the requirements of the agency responsible for the project.

A tenderer panel is not to include any tenderer that is related to another tenderer on the tenderer panel, such as companies which are subsidiaries of the same parent company, unless suitable arrangements are in place within the companies to ensure the independence of the related entities involved in tendering.

Suitable conditions of tendering are to be used when it is known that related entities are tendering to ensure that the competitiveness of the tender process is not compromised.

In selecting a tenderer panel, a tenderer selection committee must be mindful to balance the need for sufficient competition to achieve best value for money outcomes from the tender process against the overall likely cost of tendering to the tenderers. As a guide, it is recommended that the following minimum number of prospective tenderers be selected for a tenderer panel:

5 tenderers for a construction contract system (the work may or may not include some design and design coordination responsibilities for the contractor)
4 tenderers (recommended maximum) for a construction contract system when tenderers are selected from a list of contractors accredited under the Contractor Best Practice Accreditation Scheme
3 tenderers for a design and construct, managing contractor, design construct and maintain or a relationship-based contract system, or
3 tenderers for a consultant engagement (including project director or project manager).

The tenderer selection committee will select at least 2 reserves for a tenderer panel.

In addition to the above, the agency responsible for the project may choose to add one additional suitably prequalified tenderer for construction work.

This may be done in circumstances where a contractor has become prequalified and yet has not obtained a tender opportunity within 6 months of becoming prequalified. The secretary of the tenderer selection committee will provide the committee with information generated from CCMS on such contractors for consideration for selection.

Unless noted otherwise in this guideline, tenderers are selected from panels of contractors and consultants prequalified under the NSW Government. Benefits of this approach include:

selection of tenderers that have demonstrated suitable experience, capability and capacity to achieve better and more consistent contract or service outcomes
selection of tenderers that have demonstrated systems, performance and behaviour that conform with NSW Government requirements
reduced tendering costs relative to open tenders and multiple staged tender processes, while maintaining appropriate levels of competition
provision for client preferences to be taken into account when selecting tenderers through knowledge of the available prequalified tenderers
the application of fairness, equity and probity in the tenderer selection process.

Contractors or consultants (other than local consultants or in-house resources) not prequalified under the NSW Government cannot be considered for selection under this tenderer selection process.

For a consultant engagement, a tenderer selection committee may select local consultants or an in-house resource for inclusion on a consultant tenderer panel. Guidance regarding the selection of local consultants and in-house resources is provided in this guideline below.

If the tenderer selection committee cannot reach agreement on a tenderer panel, the selection determined in accordance with the above criteria by the most senior agency representative will become the decision of the committee. Under such circumstances, the secretary must record the reasons for failure to achieve a unanimous decision.

Local tenderer selection committee

The local tenderer selection committee will select the appropriate number of prospective tenderers for each tender process.

In addition to the above recommendations, when selecting a tenderer panel for a consultant engagement with an estimated fee in the range of from $30,000 up to less than $50,000, a local tenderer selection committee, when selecting from a prequalified panel of consultants, may choose to select a single tenderer.

When selecting more than one tenderer, the number of tenderers selected will include reserves that can be called on to tender if a prospective tenderer declines the invitation. The local tenderer selection committee must ensure that any proposed selection, including the selection of reserves, is based on a current prequalification panel.

The local tenderer selection committee is to ensure the selection of those on the prequalification list suits their area of operation, and relative level of skill, past performance, business relationship with the NSW Government agencies involved in the project, current work commitments and performance against other applicable criteria.

Support for a tenderer selection committee

In addition to any duties mentioned above, the secretary will:

Prior to a request for tenders (RFT) being issued

enquire of each prospective tenderer selected (in selected priority order) as to its availability to tender, log the invitation, obtain written acknowledgement and place a copy of the acknowledgement on file
ensure that if an in-house resource is selected to tender competitively for a consultant engagement, all prospective tenderers are notified of this selection at the time of the invitation to treat
list the selected tenderers that accept the invitation and those that decline, and invite reserve tenderers from the list if necessary
seek the guidance of the relevant agency representative and senior manager if it appears that a tenderer panel may not be filled
as soon as the tenderer panel is filled or a decision is made to proceed with a lesser number in the panel, record the final selected tenderer panel
record in CCMS the planned closing date of tenders, the pre-tender estimate and invitation response details for all selected tenderers (accept, decline or fail)
advise the project manager, agency representative or other person who requested the tenderer panel, of the selections and confirmed tenderers

Following the close of tenders

obtain and record in CCMS the price and ranking for each tender and list the invited tenderers, if any, that did not tender (this will require obtaining this data from agencies not using etendering)
keep the relevant senior manager (for example NSW Procurement Executive Director) fully informed of any unusual patterns in tendering, individual tenderer decline or failure rates and selection system performance.

Support for a selection committee

Those persons responsible for administering the prequalification panels or lists must ensure that:

each prospective tenderer's performance has been monitored and that past and current performance warrants the tenderer's consideration for selection
the relevant selection committee is fully informed about each tenderer's past tendering opportunities and performance.

Procedures for selection and establishment of a tenderer panel

Tenderer selection

For the selection of tenderers for a contract valued at over $1 million, or for a consultant engagement with an estimated fee of $50,000 or more, the project manager or the agency representative will submit the form as soon as possible and no later than midday on the Friday prior to the tenderer selection committee meeting.

The form is used for:

initiating the process for selection of a tenderer panel
providing PSS with essential data on the proposed tender
creating and issuing an RFT number for all contracts (including consultant engagements) for reference, tracking and other management purposes when an RFT number has not already been provided.

In response to form submission and prior to a tenderer selection committee meeting, the secretary will produce a report from the contractor and consultant management system (CCMS) database listing those prequalified and capable of carrying out the work.

The secretary will provide the list to the project manager (or person who submitted the form for consideration prior to the tenderer selection committee meeting. The secretary will also provide the project manager with an RFT number.

The project manager is encouraged to consider the list with the agency and submit a brief written recommendation to the secretary of the tenderer selection committee.

For the selection of a consultant tenderer panel, the project manager may recommend the selection of local consultants or an in-house resource. The list and any recommendation or submission must not be made public.

If the agency senior manager or the project manager or their nominee has a strong conviction that a particular potential tenderer should or should not be invited to tender, that person must provide sound reasons based on the selection criteria set out above.

A recommendation to the tenderer selection committee not signed personally by the agency senior manager or project manager or their nominee will not be considered.

In response to a form submission, the tenderer selection committee selects a tenderer panel in accordance with these guidelines.

Tenderer panel selections remain valid for 2 months. After this time, a review of the selection should be undertaken by the tenderer selection committee to ensure that there are no recent performance or relationship issues that should result in a change to the tenderer panel.

Once a tenderer panel has been selected it must not be changed unless there are compelling reasons that are material to the success of the relevant contract or the tender or selection process. Should such reasons arise, the agency senior manager or project manager should immediately contact the senior manager, Policy Support Services to arrange for a reselection, if deemed necessary.

Open selective tenders

As an alternative to selective tendering as described in this guideline, in circumstances where a project is determined by the agency responsible for the project to be of a high value and high risk, the agency may choose to adopt a tenderer selection process based on open selective tendering.

When the open selective process is used, the requirements for multi-stage tendering must be complied with.

Prior to an agency commencing an open selective tender process, the agency must obtain from the secretary a report from the contractor and consultant management system (CCMS) database listing, for each open selective tenderer panel needed, those contractors or consultants prequalified and capable of carrying out the work.

The report will also show the past performance, capacities, current contracts, restrictions and past tender opportunities of the prequalified tenderers.

The agency responsible for the project is to carry out shortlisting using the open selective tender process by way of an expression of interest (EOI) process.

The number of contractors or consultants to be shortlisted to tender should be as recommended above. Expressions of interest for shortlisting are to be invited from the whole panel of contractors or consultants on the CCMS listing with proven capability for the work type, value and geographical area of the project.

To manage the process and evaluate the EOIs, the agency responsible for the project must convene an evaluation committee with membership generally consistent with that of the tenderer selection committee.

The evaluation committee must plan and manage the expressions of interest process using a documented management plan. The management plan must be approved and signed off by the evaluation committee prior to commencement of the EOI process.

The plan must detail the process for the invitation, receipt and evaluation of the EOIs, along with the approval process for establishment of the shortlist of tenderers.

In this process, respondents should be invited to indicate their interest in being selected to tender and respond to non-price criteria only. No pricing of any sort is to be included in this open selective process to establish a shortlist of suitable tenderers.

Once the EOI process and shortlisting is concluded and the tenderer shortlist is approved by the agency, priced tendering or other processes such as early tenderer involvement (ETI) may proceed.

Invitation to treat

To prepare for the calling of tenders, the project manager (or in the absence of a project manager, the agency representative responsible for initiating the tender process) must complete section 1 of the form.

Seek and obtain approval from the officer with the relevant delegated authority (the agency senior manager) and submit the completed form to the Suppliers Systems Officer, PSS.

To maintain and operate robust prequalification and tenderer selection processes, the secretary of the tenderer selection committee will, upon receipt of a completed and authorised form, issue an invitation to the selected tenderers.

This invitation is not an invitation to tender but is an invitation to treat and is only for the purpose of confirming each selected tenderer’s interest in tendering. At the conclusion of this short invitation to treat process, the secretary will confirm the tenderer panel in writing to the project manager.

Until the secretary of the tenderer selection committee formally notifies the agency of the completion of the invitation to treat process, the project manager, agency representative or senior manager must not promise potential tenderers a tendering opportunity or advice, liaise or invite tenderers to tender for contracts or consultant engagements.

Procedures for selection and establishment of a tenderer panel when using a local tenderer selection committee

For the selection of a tenderer panel for a construction contract valued less than $1 million, agencies and their project managers are encouraged to develop and adopt procedures that are consistent with the procedures for selection and establishment of a tenderer panel, described in this guideline.

Agencies using PWA project management services may also elect to deploy its computer-based automated tenderer selection procedures commensurate with the level of risk anticipated in construction contracts valued less than $500,000.

Arranging a request for tenders

Agencies may decide to either use etendering or the tendering system of the agency or its project manager for the purpose of inviting tenders and managing the tender process.

When an agency uses a tenderer panel selected by a tenderer selection committee and the agency then uses its own tendering system or that of its project manager to request, receive and process tenders:

the project manager, agency representative or other person who requested the tender panel must provide the tenderer panel list to the relevant tender issuing office so that the request for tender and tender documents can be issued
the tender prices and award disclosure details must be forwarded to the CCMS Administrator by emailing cpr@finance.nsw.gov.au

When an agency uses etendering to request, receive and process tenders the secretary of the tenderer selection committee will:

notify the tender issuing office of the tenderer panel list so that the request for tender and tender documents can be issued
forward a copy of the completed form to the Manager, Tendering – Office of NSW Procurement
obtain and record in CCMS the price and ranking for each tender and list the invited tenderers, if any, that did not tender.

Local consultants

The NSW Government supports the use of regionally based local consultants.

For the purposes of these guidelines, a local consultant is a consultant located in a town outside the Sydney, Newcastle and Wollongong geographical areas, whose business does not extend beyond one geographical area.

When selecting a tenderer panel for a consultant engagement, a tenderer selection committee is entitled to use its judgement in selecting a suitably capable local consultant to perform work.

Under this guideline, prequalification of a local consultant, while encouraged, is not necessary. However, before being invited to tender, the project manager must make sure that the local consultant:

satisfies criteria set out in the tender document for professional indemnity insurance and public liability insurance
has the minimum professional qualifications described in the current Consultant Prequalification Scheme for Consultants in Construction, for the type of services to be tendered
is able to demonstrate sound capability and experience in the last 2 years in successfully delivering services of the type and value of the services to be tendered.

While the above criteria are not as rigorous as for prequalification, these requirements help ensure that the local consultant is capable of carrying out an engagement.

For a tenderer selection committee to apply this local consultant guideline for a consultant engagement valued at $50,000 or more, it is recommended that the following minimum number of prospective tenderers be selected for a tenderer panel:

2 consultants that are prequalified
up to 2 local consultants.

This approach provides tender opportunities for local consultants in a competitive, fair and equitable environment, meeting NSW Government’s objectives.

In-house resources

Consistent with NSW Government’s Service Competition guidelines (Premier’s Memorandum 97-94) and guidelines for engagement of government agencies as service providers.

Some NSW Government agencies supply in-house technical consulting services to other agencies.

NSW Government agencies may choose to:

negotiate a service level agreement with an in-house service provider where the required professional expertise is available and the provision of the services is demonstrated to be value for money
select an in-house resource to tender in competition with private sector prequalified consultants, or
not select an in-house resource when selecting a tenderer panel.

The decision to engage in-house resources is solely at the discretion of the agency responsible for the project.

When the project manager or agency representative responsible for the project recommends an in-house resource for selection as a tenderer, the secretary must notify the relevant business unit manager of the agency responsible for the in-house resource. The manager will be requested by the secretary to accept or reject the opportunity to tender in competition with private sector consultants.

If the manager accepts the opportunity to tender, the secretary will add the in-house resource to the selected tenderer panel. In addition to the minimum number of 3 prospective consultant tenderers selected for a consultant tenderer panel, the secretary adds the in-house resource so as not to disadvantage the selected prequalified consultants.

Related resources

Find more resources on the construction category page.