Key considerations for local authority contracting
Local authorities have considerable spending power and can open the doors to further business through key introductions but getting started is not an easy recipe to follow. Tom Trowhill, senior associate at law firm Cripps, considers some of the ingredients for the procurement process.
Securing a local authority contract can be an attractive proposition for food businesses, guaranteeing regular income and introductions to a larger range of consumers. However, local authorities operate under a specialised procurement regime and have different requirements compared to private sector businesses. While food producers are used to meeting a whole host of regulations, the public procurement process rules are complex and can include the reviewing and submitting of detailed documentation.
The process is also time consuming, so be sure to weigh up your chances of success against the time spent preparing documentation and participating in the application process as this is a very different arena to kitchen prep.
When it comes to the contract, draft terms will typically be provided with the procurement documentation, giving you limited room to negotiate. Even where tenderers are able to obtain changes to the contract terms, a local authority will typically stipulate these changes have to be agreed during the procurement process, rather than post-award.
Food producers may also want to consider the local authority’s commercial model, as these can often follow an ‘outcomes or incentive payment model’. This means the tenderer will be paid an element of its fees for performing services. However, a proportion of the fees will only be paid subject to achieving set outcomes which may be unrealistic or beyond your control. Where a high outlay is required for ingredients – which can themselves be a risk – this can often be seen as too much.
Further risks will also be found in the contract, with local authorities requiring tenderers to accept wide ranging liabilities. Extensive indemnities are also common so be sure to review terms carefully to see if you are comfortable with this. You should also be alive to the risk of employees transferring over to you as part of taking on the contract from the local authority or their current supplier. You should seek clarification on this point as part of the procurement process.
Local authority contracts can often be up to five years or more. This can be reassuring for long term business and helpful when negotiating contracts to buy ingredients, but it is still important to try to secure the ability to terminate the contract, for example, on a set period of notice after a certain time has elapsed. Otherwise food producers could run the risk of being tied into an unprofitable contract.
Local authority contracts are a good source of work for an organisation, which if structured correctly can result in long-term and profitable arrangements. Tenderers do, however, need to consider the local authority arrangements as a whole which does involve time, money and patience.
If you are considering tendering for local authority work or would like to know more about the procurement process, contact Tom Trowhill on 01892 598542 or email firstname.lastname@example.org.
This article first appeared in B&I Catering in October 2018.