The Cayman Islands Government spends over $100 million KYD a year on the procurement of goods and services. Under the Procurement Law 2016, all public entities are now required to consider the economic impact and social benefits that a government procurement project may create in the community, particularly as it relates to micro, small and medium sized suppliers that are operating in the Islands.
Subject to the requirement to adhere to the principles of procurement including Value for Money, public entities must give preference to suppliers who are operating in accordance with the Trade and Business Licensing Law, 2014 (Law 21 of 2014).
Steps that public entities are encouraged to take on a regular basis are:
- Keep local suppliers informed of upcoming procurement projects. Click here to see what is planned.
- Structure projects to provide opportunity for smaller suppliers to participate
- Avoid restrictive specifications and unnecessary requirements
- Use plain language and simplified procurement documents
- Use reasonable commercial terms and conditions including and be mindful of payment timelines
- Invite suppliers to pre-bid briefings so everyone is on the same page
Bigger is not Always Better
When it comes to public procurement, major construction projects are one of the highest risk areas for bid disputes, cost overruns and performance delays. Some times larger projects fail just because they are simply too large for a single supplier to manage, despite the promise of greater value for money through bigger economies of scale. The landscape around the world is littered with failed projects that were “too large to fail”.
Rather than creating larger projects all the time, sometimes it makes sense to consider breaking up a larger project into smaller parts before even beginning a project. This is what is called “disaggregation”. Here are some reasons to consider it:
- To deal with a known lack of local capacity to bid on a major project;
- To reduce the risk from a single contractor failure or poor performance;
- To increase competition and avoid a potential single bid;
- To promote innovation by having more bidders;
- To maximize the benefits to the greatest number of suppliers without compromising value for money.
To be permitted under the Procurement Law & Regulations a decision to disaggregate must meet the following conditions:
- Must be planned and included in the project Business Case; and
- Must be approved prior to project commencement; and
- The costs of disaggregation must not outweigh the benefits received; and
- Value for Money must still be achieved..
Understanding the local market place is a key aspect of procurement project planning. Under the new Law & Regulations, public servants are required to properly appraise and undertake a business case before starting a procurement process.
For projects $250,000 and greater, the business case must include a Local Impact Assessment
For projects $10,000,000 and greater the business case must include a Local Industry Consultation Plan
Local Benefits Test
Under the new Procurement Law & Regulations an entity can use a local benefits test as part of the evaluation of bids. This means that suppliers, as part of their response to a government competition document, may be asked to explain and provide the following:
- the benefit to the economy of the respective bid; and
- specific commitments to benefit local business;
The supplier responses to the local benefits test will be used by the entity in evaluating the bids and will be eligible for additional points based on the criterion weighting disclosed in the bid document. A supplier can choose not to respond to the test but they will not be eligible for any points relating to this criterion.
For projects $250,000 and greater, bidders will be asked to submit a Local Industry Impact Statement. The impact statement is aimed at enabling suppliers to outline how their proposed supply of goods/services will provide a positive impact on the local industry.
For projects $10,000,000 and greater, bidders may also be asked to submit a Caymanian Industry Participation Plan to demonstrate how their submission will positively impact on the local industry/economy.
Once a supplier has been selected, and upon the entry into force of the procurement contract, the entity will post on the government’s website the successful bidder’s Local Industry Impact Statement. This will make the public aware of the supplier’s commitments and assist in ensuring that commitments are met.