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Invitation to Tender and Tender Specification
Appointment of a Fund Manager to Deliver the Finance for Business North East Microloan Fund
Tender Reference: OJEU 2014/S 078-136653
Date: 16 April 2014
North East Finance (Holdco) Ltd Ground Floor
1 St James’ Gate Newcastle upon Tyne
NE1 4AD
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The Finance for Business North East (FBNE) Microloan Fund
Thank you for expressing an interest in North East Finance (Holdco) Limited’s (“NEF”) Contract Notice (OJEU 2014/S 078-136653). You are hereby invited to submit your proposal for the contract in accordance with this Invitation To Tender (“ITT”).
The information set out in this ITT is being made available by NEF on condition that:- Bidders shall at all times treat the information as confidential- Bidders shall not disclose, copy, reproduce, distribute or pass the information to any other
person at any time or allow any of these things to be done- Bidders shall not use the information for any purpose other than for the purposes of
responding to this ITT.
The purpose of this procurement exercise is to appoint a fund manager (the "Successful Fund Manager") to take over the delivery of NEF’s Microloan Fund (the "Microloan Fund") from the current provider. The successful bidder will have to promote the Microloan Fund, source and evaluate loan applications, make loans and monitor and manage the existing loan book as well as all new loans made following its appointment. The draft Fund Management Agreement (the "Contract") which the Successful Fund Manager will be invited to enter into is annexed to (or otherwise provided together with) this ITT.
North East Finance (Subco) Limited (“NEF Subco”) a wholly owned subsidiary of NEF will enter into the Contract with the Successful Fund Manager. All Microloan Fund loans are (and will continue to be) made by the fund manager as agent of and in the name of NEF Subco.
You are advised to read this Invitation to Tender and the accompanying documents carefully to ensure that you are fully familiar with the requirements of the contract and of the procurement process.
This document sets out the background to the FBNE Microloan Fund and summarises the specification of the Contract and what will be required of the successful bidder which takes over management of the Microloan Fund. The appendices to this document are equally important and so please review them and ensure that you follow the instructions and provide all of the information requested. The appendices are:
Appendix 1 Important Information and Instructions for Bidders Page 23Appendix 2 Tender Proposal Questionnaire Page 26Appendix 3 Organisation Information Questionnaire Page 35Appendix 4 Eligibility Criteria Page 43Appendix 5 Form of Tender Page 45
NEF reserves the right at any time to issue further supplementary instructions and updates and amendments to the instructions and information contained in this ITT as it shall in its absolute discretion think fit.
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1 Background to the FBNE Programme and Summary of the Services Required
1.1 NEF is the holding fund manager for the Finance for Business North East (“FBNE”) programme. This was established under (and is sometimes referred to as) the JEREMIE programme. JEREMIE stands for Joint European Resources for Micro to Medium Enterprises, and is a joint initiative between the European Commission and the European Investment Bank Group.
1.2 In late 2009, NEF secured a total of £125m of investment capital: £62.5m from the European Investment Bank; £44.25m from the North East European Regional Development Fund Competitiveness Programme 2007-2013 (“ERDF”) and £18.25m from the UK government Department for Business, Innovation and Skills (“BIS”). These funds are to be invested from 2010 to the end of 2014 in micro, small and medium sized companies located in the North East of England.
1.3 Early in 2010, NEF launched the following six funds:
Fund Fund Size Fund ManagerProof of Concept £15m Northstar VenturesTechnology £25m IP GroupAccelerator £20m Northstar VenturesAngel £7.5m Rivers Capital PartnersGrowth £20m NEL Fund ManagersGrowth Plus £20m FW CapitalTotal £107.5m
1.4 In early 2011, NEF appointed Tyne and Wear Enterprise Trust Limited (“Entrust”) to manage a seventh fund, the £5m Microloan Fund – which made its first loans in June 2011.
1.5 Due to circumstances unconnected to the Microloan Fund, Entrust will cease to manage the fund around (or prior to) the end of June 2014, at which point the current fund management contract will terminate. The inability of Entrust to continue to manage the fund has resulted in NEF’s requirement to appoint a new fund manager, which is the purpose of this ITT.
1.6 Due to high levels of demand, the Microloan Fund and Accelerator Funds received additional capital allocations of £500k and £5m, respectively. As such, £118m of NEF’s initial £125m of investment capital has been committed to the seven funds. The balance of £7m is expected to be made available to the six funds listed in the above table for follow-on investments in promising portfolio companies.
1.7 NEF has been offered an additional £17.5m of grant funding for investment in 2015: £10m from the ERDF by the Department for Communities and Local Government and £7.5m from the Government’s Regional Growth Fund by BIS. The £7.5m Regional Growth Fund grant was secured by the North East Local Enterprise Partnership in collaboration with NEF.
1.8 The services required, to which the Contract to be entered into pursuant to this ITT will relate, are:
To lend the un-invested balance of the £5.5m currently committed to the Microloan Fund. (It is expected that this balance will be c. £1.5m at the point when the Contract will start);
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To lend a further £1m which will be committed to the Microloan Fund from the 2015 extension funds.
To lend the full amount (approx. £2.5m) in the period from the start of the contract (estimated July 2014) to the end of 2015. No loans can be advanced after 31/12/15, and the full amount should be disbursed by early-to-mid December 2015 at the latest.
To lend only to SMEs based in the North East of England – comprising Northumberland, Tyne & Wear, County Durham and the Tees Valley.
To lend the funds so as to maximise the positive economic outcomes, including the creation of new jobs and the safeguarding of existing jobs.
To lend the c.£2.5m to approximately 210 separate businesses – i.e. to lend on average c.£12k per business (unless otherwise agreed by NEF).
To actively monitor, manage and maximise returns from the existing Microloan Fund portfolio of c. 240 SMEs, and to do the same in respect of all new borrowers added to the portfolio by the Successful Fund Manager.
To manage the fund from appointment until fully wound-up prior to the end of the Contract term on 31 December 2019, unless terminated earlier in accordance with the Contract or unless the Contract term is extended by up to a maximum of one year by agreement between NEF and the Successful Fund Manager.
1.9 A number of members of staff of the incumbent Microloan Fund manager have spent the majority of their working time delivering the FBNE Microloan Fund. Due to the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), they may be entitled to continue to be employed by the successful bidder for this contract and may wish to be so. Further information regarding the current team involved in delivering the FBNE Microloan Fund contract is set out at section 8, below.
2 Profile of the FBNE Microloan Fund to Date
2.1 The FBNE programme was established in 2009 with the support of the Regional Development Agency (One North East) and the European Regional Development Fund, because its aims and objectives were (and remain) consistent with the North East’s Regional Economic Strategy and the North East ERDF Operational Programme.
2.2 These aims include increasing Gross Value Added per head in the region to 90% of the UK average, in a sustainable manner, by 2015. The approach to achieving this includes:
increasing business density by creating 3000 new businesses, of which 15% are in disadvantaged areas;
the creation/safeguarding of 28,500 jobs of which at least 10% are in disadvantaged areas;
improving the survival rates of new businesses; and increasing the growth rate and profitability of existing SMEs.
2.3 NEF’s funds contribute to these activities by providing finance to help support business and job creation and growth. The Microloan Fund itself has helped to create over 165 new businesses to date and provided funding to over 130 existing businesses.
2.4 The Regional Development Agency wanted the FBNE programme to include a microloan fund for its social as well as economic benefits. By lending to people classed as disadvantaged (due, for example, to being unemployed, disabled or
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resident in a deprived area), it helps to tackle social exclusion and welfare dependency by enabling the economically inactive to create their own business. At the time when the FBNE Microloan Fund was established, the funding available to Community Development Finance Institutions and other providers to this market had reduced significantly and so the FBNE Microloan Fund helped to ensure that some provision remained for this market segment.
2.5 The principal features of the £5.5m FBNE Microloan Fund as currently constituted are:
2.5.1 its objective is to support the creation of new enterprises and the growth of existing micro and small enterprises across the North East of England by lending small amounts of capital to individuals, pre-start enterprises and existing businesses which are unable to access funds from mainstream lenders.
2.5.2 it is intended to stimulate the creation of new jobs and businesses and to help secure jobs by addressing some of the unmet market demand for small amounts of commercial loan funding. All loans will be made to businesses which are, or which (if they are new-starts) have a realistic prospect of being, commercially viable and able to service and repay the loans.
2.5.3 it can lend only to businesses which can demonstrate (to the satisfaction of the fund manager) that they have been unable to raise the funding which they require from mainstream lenders and the fund manager must keep documentary evidence of this.
2.5.4 all loans must comply with the principle of ‘additionality’ – there must be a demonstrable and genuine economic impact gained from the fund’s investment.
2.5.5 its output targets are: 570 new jobs created; 583 jobs safeguarded and 518 SMEs-assisted. It does not have a leverage target but the fund manager is required to monitor and report to NEF all additional funding which borrowers secure as a consequence of receiving a loan from the fund.
2.5.6 it makes loans of between £1k and £25k to businesses operating in eligible sectors across the Region. It has the ability in a very limited number of cases and in exceptional circumstances to lend over £25k and up to £50k, with the consent of NEF. To date, that ability has been used in only one case.
2.5.7 the full £5.5m must be loaned by 31 December 2014.
2.5.8 it lends both to limited companies and to private individuals operating as sole traders.
2.5.9 the loans are unsecured and are structured as capital and interest repayment loans, with interest being charged at 9% above the UK Reference Rate as set by the European Commission from time to time. From its launch in May 2011 until February 2013, the interest rate applied was a margin of 6.5% above the UK Reference Rate.
2.5.10 the maximum term of loans is 3 years; the latest loan repayment date was to be 31 December 2017. Due to the re-profiling of loans made to borrowers
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who were unable to make scheduled repayments in full, the term of a number of the existing loans will in practice exceed 3 years.
2.5.11 loans made to limited companies are supported by personal guarantees given by the company’s directors in appropriate cases. During the first 18 months of the fund’s operation, personal guarantees were not sought but this policy was reviewed and changed in 2013.
2.5.12 the fund manager is tasked with maximising repayments and minimising the level of defaults and non-performance within the portfolio, utilising portfolio management and debt recovery techniques and procedures, including enforcement actions through court proceedings when appropriate. Minimum cash return targets are included in the fund management agreement.
2.5.13 the fund manager must have a physical presence (i.e. occupy premises) in the North East of England;
2.5.14 it has targets which require a specified proportion of the fund to be lent to:
disadvantaged individuals wishing to start-up in business non-disadvantaged individuals wishing to start-up in business existing businesses.
2.5.15 the average loans size to start-ups is assumed to be between £3.5k to £8k and to existing businesses is assumed to be between £15k and £21k
2.5.16 the capital is available for lending only once during the life of the Microloan Fund and cannot be recycled. All loans are completed by the fund manager as agent for, and in the name of, NEF Subco and all payments of interest and capital are made direct by borrowers to the account of NEF Subco.
2.5.17 the fund manager of the Microloan Fund cannot lend to a business at the same time as, or within 6 months before or after, one of the other FBNE funds in NEF’s portfolio invests in the same business. This constraint can only be waived on an exceptional basis with prior written consent from NEF.
2.5.18 all loans are completed in accordance with EC Regulation No 1998/2006 governing De Minimis state aid, which limits the maximum amount of aid any one enterprise can receive within a three year period to €200k in total.
2.5.19 the fund manager of the Microloan Fund cannot lend to any enterprise which would be deemed to be an ‘Undertaking in Difficulty’, within the meaning of Article 1.7 of EC General Block Exemption Regulation No. 800/2008.
2.5.20 it cannot invest in enterprises which operate in sectors or undertake activities which are ineligible under the ERDF, EIB and state aid constraints (which are summarised at Appendix 4 of this ITT, and set out in the draft Contract).
2.5.21 it cannot make any loans specifically to aid export-related activities, which is deemed to be: where the purpose or amount of the loan is directly linked to the quantities exported, or to the establishment and operation of a distribution network or to other current costs linked to the export activities.
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2.5.22 it uses standardised procedures and legal documents to minimise costs to borrowers and ensure that the fund can make the volume of loans required to achieve its lending targets.
2.5.23 the fund manager may lend to borrowers which have previously received investment from the Microloan Fund but such repeat lending must at no point in time exceed 10% of all borrowers, i.e. no more than 1 in 10 borrowers may be repeat customers.
2.6 The performance of the FBNE Microloan Fund from its launch in May 2011 to the end of February 2014, on some key performance metrics, is set out in the following table:
Performance Measures and Outputs Performance to 28/02/14Capital Advanced/£ Invested £3,725,735Funds Returned to NEF £1,583,959No. of loans / investments made 297
Individuals wishing to start up business 165 Disadvantaged Individuals wishing to start-up 110
Non-disadvantaged Individuals wishing to start-up 55Existing Sole traders and partnerships 38
Existing micro and small ltd companies 94No. of existing SMEs supported 132No. of new businesses created 165Total SMEs Assisted 297No. of jobs created 290No. of jobs safeguarded 466No. of jobs forecasted to be created 650Private Sector Leverage £671,744Total Applications Received 834
2.7 The average loan size is currently c. £12.5k and has consistently been c. £12k throughout the operation of the fund to date. The fund has made loans across the range from £1k to £25k and has to date utilised the ‘exceptional’ ability to lend more than £25k only once – making one loan of £50k.
2.8 The incumbent Microloan Fund manager has lent to borrowers based across the North East area. The volume of lending to different parts of the region is broadly in line with what would be expected, based on the relative size of the population and business base. As illustrated in the above table, the fund has also succeeded in addressing demand from the different customer groups which it was to target.
2.9 Many of the loans made to individuals starting up businesses have been made to people starting a service-oriented business, including landscape gardening services, hair dressing, beauty and tattoo salons, cafes, catering and food production, cleaning services etc. The wider portfolio includes businesses across various sectors and of various sizes including engineering and manufacturing businesses, B2B service businesses, software IT and computer services.
2.10 Due to the financial crisis of the late 2000s and the reduction in public funding for business support programmes, the supply of capital for small loans had been severely constrained prior to the launch of the fund in May 2011. There was therefore significant pent-up demand which contributed to a rapid initial rate of investment by the fund, which lent £2m in 2011, to 161 companies. The lending profile of the fund to date is shown in the following table:
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Period Capital Loaned
SMEs Assisted
AverageLoanSize
Cumulative Capital
Cumulative SMEs
CumAverageSize
H2 2011 £2.001m 161 £12.43k £2.001m 161 £12.43k2012 £952k 78 £12.2k £2.953m 239 £12.36k2013 £613k 51 £12.02k £3.566m 290 £12.3k
2.11 The reduction in lending rate has resulted from a combination of factors. As stated above, initial demand was inflated due to the reduction in supply in the period prior to the fund’s launch. During 2012, the fund manager began to apply slightly stricter lending criteria because the emerging level of defaults and arrears and defaults from the loans made in 2011 was higher than anticipated. That contributed to the reduced lending rate, which was also impacted towards the end of 2012 and in 2013 by additional supply of small loans (in particular from the government’s Start Up Loan scheme), as discussed further in the next section.
2.12 The Microloan Fund manager must operate a system of adding borrowers to a ‘watch list’ if any scheduled payment has been missed or not made in full. Where the business of a borrower has failed and the company wound up or where there is no realistic prospect of recovering any further payments, loans are written off.
2.13 The Microloan Fund’s financial performance, including write-offs and provisions (which reflects the numbers of borrowers on the ‘watch list’) as at the end of February 2014 was as follows:
SMEsInvestments made £3,725,735Capital Returns Received £1,297,617Interest Received £286,342Total Borrowers 297Total write offs and provisions
£1,193,105
Write offs £697,120 (64)Provisions £495,985 87Current Value of Portfolio £1,235,013 233Failure Rate 32%
2.14 It was accepted by NEF and its funders that the FBNE Microloan Fund would have a relatively high failure rate, as it was intended to address demand from high-risk market segments and to produce social as well as financial benefits. However, the current failure rate is higher than the profiled upper level of c. 25%. A significant proportion of the defaults and provisions relate to loans made in first year of the fund’s operation, as illustrated below:
Time When Loans Made 2011 H1 2012 H2 2012 2013% of Loans Added to Watch List
27% 34% 32% 13%
% of Loans Written Off 29% 20% 8% 0%
2.15 The stricter lending criteria which the incumbent fund manager began applying in 2012 has therefore succeeded in improving the performance of the loans.
2.16 During February 2014, 178 of the 233 ‘live’ borrowers within the portfolio (76%) made a repayment. Of these, 136 made the full repayment and 42 made a partial
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repayment. Monthly repayments received by NEF from the portfolio now average between £50k and £60k.
2.17 In November 2012, the incumbent fund manager set-up the facility to accept debit or credit card payments from borrowers by phone when direct debit payments are not made, which has assisted recovery. The incumbent fund manager has to date taken court action against 11 borrowers to recover outstanding sums, securing judgements through the County Court and in some cases using bailiffs to attempt to make recoveries.
2.18 The Microloan Fund has received in total 861 applications, with a value in excess of £9.7m. Due to a combination of factors, including greater availability of loans and the refocused marketing of the fund to target lower risk propositions, the rate of applications slowed during 2013 and has recently averaged fewer than 15 applications per month.
3 Changes to the Market for Small Business Loans Since 2011
3.1 The Microloan Fund was established in 2011, when public funding for Community Development Finance Initiatives and small grant projects was rapidly diminishing. The Regional Development Agency therefore asked NEF to incorporate in its portfolio a Microloan Fund which would service both the market which CDFIs address as well as more mainstream small business lending. Accordingly, specific targets were set for lending to individuals (including those classified as disadvantaged individuals) and to start-up businesses.
3.2 The small loan market is different in 2014 to what it was in 2010. Bank lending to small businesses remains constrained but there is greater availability of loans for start-ups and of grant funding from councils, enterprise agencies and projects established with the assistance of the government’s Regional Growth Fund.
3.3 Of greatest significance to the market addressed by NEF’s Microloan Fund is the government’s Start-Up Loan scheme, which was set up in 2012. It offers unsecured loans at 6% interest per annum, with repayment terms of up 5 years and a capital repayment holiday of up to a year. Its advertised average loan is £6k but it can lend in excess of this; there is no publicised upper limit but it can lend up to at least £10k-£15k.
3.4 Since it began in 2012, the Start-Up Loan scheme has made 5% of its loans in the North East of England – the area which the FBNE Microloan Fund serves. This implies that it has lent c. £3.7m to c. 730 individuals in the North East over the past 18 months. That level of activity has made a significant impact on the market for small loans to individuals starting up businesses.
3.5 The Start Up Loan scheme offers loans at a lower interest rate than the FBNE Microloan Fund and also offers capital repayment holidays and additional benefits such as discounts to mobile phone and website hosting costs and some mentoring assistance. It is only available to new-start businesses or those which have been trading for less than a year, but is clearly capable of offering an attractive package to that market segment and one which directly competes with the FBNE Microloan Fund. The incumbent Microloan Fund manager has cited the Start Up Loan Scheme as having made a significant impact on the level of applications to the fund from individuals looking to start a business.
3.6 In view of this (and as NEF has already exceeded the relevant targets), the targets for lending to specific customer groups will be removed for the re-launched FBNE
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Microloan Fund. In addition, the new fund manager will be given an increased ability to lend sums between £25k and £50k, as the supply of loan funding at the lower level has increased but bank lending to small companies remains constrained. There is a perception among some in the marketplace that a funding gap now affects businesses seeking to raise c. £20k to £50k of loan finance.
4 Specification of the Re-Launched FBNE Microloan Fund being procured by NEF
4.1 The initial capital to be deployed by the re-launched Microloan Fund will be the un-invested balance of the current £5.5m fund (estimated to be £1.5m as at 1 July 2014) plus an additional £1m. It is anticipated that the Successful Fund Manager will therefore be responsible for lending c. £2.5m, and for managing the existing and enlarged portfolio so as to maximise returns to NEF and to minimise defaults.
4.2 The lending period of the re-launched fund will be extended so that it ends on 31 December 2015. The Successful Fund Manager will therefore be expected to lend c.£2.5m in the c.18 month period from appointment to 31/12/15.
4.3 NEF will retain the ability to commit additional capital to the fund and to de-commit capital, based on the actual performance of the Successful Fund Manager and on market conditions relating to the supply of and demand for small business loans in the North East.
4.4 Although no targets relating to separate customer groups will be imposed on the re-launched fund, NEF will require the new fund manager to continue to target an average loan size in the region of £12k – with a view to ensuring that around 210 separate businesses receive assistance from the re-launched fund.
4.5 The principal features of the re-launched FBNE Microloan Fund will remain as set out in paragraph 2.5, above, subject to the following modifications:
4.5.1 its output targets will be: 690 new jobs created; 643 jobs safeguarded and 728 SMEs assisted.
4.5.2 its core lending range will remain between £1k and £25k. However, it will be capable of lending up to £50k and the Successful Fund Manager will be permitted to market the fund accordingly. The prior consent of NEF will be required for any loans which the Successful Fund Manager makes above £25k. NEF’s decision on whether to consent will in no circumstances be based on the merit of the business of the applicant or on the merit of the lending decision. The requirement for NEF to consent to loans above £25k is being retained to help NEF and the new fund manager to monitor and control progress against output targets, in particular the SMEs-assisted target, and potentially to allow the fund to make a larger number of loans at a higher value if there is greater market demand at that level. See further at paragraph 4.12, below.
4.5.3 the full amount of the fund (£6.5m, or as adjusted) must be loaned by 31 December 2015 and no extension beyond this date will be granted. The balance which will be available to the Successful Fund Manager to lend in the period from appointment to 31/12/15 is estimated to be £2.5m.
4.5.4 the Successful Fund Manager may be given some discretion to determine the margin above the UK Reference Rate charged to different borrowers, subject to ensuring compliance with state aid regulations. For example, a lower rate of interest could be charged to individuals starting-up a business and
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borrowing a small amount and higher rate to established companies borrowing larger sums. The approach taken will be agreed with the Successful Fund Manager following appointment. The UK Reference Rate is published by the European Commission, is currently 0.88% and can be found here:
http://ec.europa.eu/competition/state_aid/legislation/reference_rates.html
4.5.5 the maximum term of loans will remain 3 years. The latest scheduled repayment date should therefore be 31 December 2018.
4.5.6 there will be no targets relating to separate customer groups such as start-ups business, existing businesses and disadvantaged individuals.
4.5.7 the targeted average loan size will be £12k – unless otherwise agreed by NEF.
4.5.8 all loans will be completed in accordance with the new EC De Minimis state aid regulation (which retains the €200k, 3 year limit), EC Regulation No. 1407/2013.
4.5.9 to help ensure that the SMEs-assisted target is achieved, the number of borrowers that can receive a further loan from the fund will be reduced from 10% to 5% - i.e. no more than 1 in 20 borrowers may be repeat customers.
4.6 Unless otherwise agreed with NEF, the fund manager will be required to lend the fund so as to achieve the following profile:
Actual to Forecasts:£'000s 20/03/2014 30/06/2014 30/09/2014 31/12/2014 31/03/2015 30/06/2015 30/09/2015 31/12/2015
Invested (£'k) 3,748 252 250 500 500 500 500 250
Investments 303 25 21 42 42 42 42 21
SMEs supported 301 25 21 42 42 42 42 21
4.7 The Successful Fund Manager will be required to market the fund appropriately to maximise the prospects of achieving the above profile. In their tenders, bidders are required to explain how they will approach this.
4.8 As identified in section 3, above, the increased supply of small loans to start-up companies may depress demand for sub-£10k loans from the Microloan Fund. Equally, the large volume of start-up loans made during 2012 and 2013 may help to stimulate demand in 2014 and 2015 as a number of those businesses grow and require further growth funding. The Successful Fund Manager will be required to take appropriate steps to stimulate demand both from earlier-stage businesses requiring sub-£10k loans and from more established businesses requiring larger loans – and to report to NEF on a monthly basis on the marketing activities undertaken in relation to both segments on the market, and on applications received.
4.9 If, due to market conditions and/or the performance of the Successful Fund Manager, it becomes apparent that the above profile is unlikely to be achieved then NEF will liaise with the fund manager to agree appropriate adjustments – to the profile and, if appropriate, to the amount of capital to be lent by the Microloan Fund.
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4.10 Over half of the funding for the re-launched Microloan Fund is being provided by the North East ERDF Competitiveness and Employment Programme 2007-2013. The latest date by which this funding can be deployed is 31 December 2015 and it is imperative that NEF secures full investment of the £142.5m under its management prior to that date.
4.11 NEF has the ability to re-allocate capital between the seven funds in its portfolio, including the re-launched Microloan Fund. If the Successful Fund Manager is not able to lend at the rate set out in the profile under paragraph 4.6, NEF may de-commit capital from the Microloan Fund – i.e. reduce the amount available to the new fund manager to lend, and re-allocate for investment by another fund (see Schedule 6 of the attached draft Contract).
4.12 If the Successful Fund Manager is achieving or exceeding the profile in relation to the quantum of capital loaned, but is doing so by making loans of an average size greater than the £12k average maintained by the fund to date then NEF will discuss the appropriate actions with the fund manager. Any departure from the above target profile will require the consent of NEF. Appropriate actions will depend on the circumstances at the relevant time relating to demand, fund manager performance, market conditions and the performance of NEF’s portfolio as a whole, and may include:
4.12.1 NEF requiring the fund manager to increase marketing activity with a view to stimulating demand from earlier stage businesses for smaller loans. The fund size remains unchanged – and NEF accepts that the fund may be fully deployed before 31/12/15 and that the SMEs-assisted output may be lower than target if the fund manager does not succeed in lowering the average loan size.
4.12.2 NEF is satisfied that the Successful Fund Manager has taken all appropriate measures to promote the fund and to stimulate demand but has not received sufficient applications of acceptable quality to achieve the profile. In this event, and if no additional investment capital is available to commit to the Microloan Fund, NEF may agree an amended profile to reflect the higher than anticipated average loan size. NEF may accept that this may imply that the fund is likely to be fully deployed significantly in advance of 31/12/15 and that the SMEs-assisted output achieved may be materially lower than the target.
4.12.3 If the circumstances are as described in the preceding paragraph, but NEF has additional capital which it can commit to the Microloan Fund, NEF may allocate additional capital to it – if an appropriate lending profile can be agreed with the fund manager. For example, if the average loan size is moderately higher than the target of c. £12k, then additional capital of e.g. £250k, £500k or £750k could potentially be committed to the Microloan Fund with a view to it achieving the SMEs-assisted targets set out above. This would be dependent on the initial lending rate and evidence of demand being satisfactory, and is unlikely to be considered after Q2 2015.
4.13 The above examples are provided strictly for illustrative purposes. Bidders should assume that no additional capital will be allocated to the Microloan Fund; it is unlikely that any will be. NEF’s strong preference is for the lending profile set out under paragraph 4.6 to be achieved, and the Successful Fund Manager will be charged with achieving it. NEF understands, however, that this will be dependent in part on market conditions. If these dictate that the average loan size will in practice be higher than
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£12k, and if NEF is able to access additional capital for the Microloan Fund, then it will be considered by NEF and its funders and discussed with the fund manager.
4.14 The fee payable to the Successful Fund Manager will be split into two components: a fee for the portfolio management of the pre-existing loan book and a fee for lending the c. £2.5m from the date of appointment until 31/12/2015 and for managing the resultant portfolio. The latter part of the fee (for new lending activity and managing the resultant portfolio) will increase or decrease in proportion to any increase or decrease in the capital committed to the fund. The amount of the fee which relates to managing-out the pre-existing portfolio will not be affected by any increase or decrease in the amount of capital committed to the fund. Please see section 3 of the Tender Proposal Questionnaire set out at Appendix 2 for further details on the fee structure.
4.15 The Successful Fund Manager will be required to maximise the financial returns generated by the fund through deal selection and structure (in relation to the new lending undertaken by the Successful Fund Manager) and by putting place appropriate resources, systems and strategies to manage the portfolio and minimise defaults (in relation both to the pre-existing portfolio and to new borrowers to which the Successful Fund Manager lends).
4.16 The fund should experience default rates which are no worse than the average rates typically experienced by microloan funds and should aim to achieve lower than average default rates. In their tender submissions, bidders should describe their proposals for delivering the fund within an acceptable default rate.
4.17 The Successful Fund Manager should prefer applications from businesses which have the greatest potential to achieve the highest output performance, in terms numbers of jobs safeguarded and created – with jobs with a salary of £20k+ pa being preferred.
5 Principal Requirements of the New FBNE Microloan Fund Manager
5.1 The successful bidder will take over from the incumbent Microloan Fund manager as the appointed agent of NEF Subco, assuming sole responsibility for all aspects of the management of the FBNE Microloan Fund – both its existing portfolio and new lending activity.
5.2 The successful bidder will be required to enter into a Fund Management Agreement substantially in the form of the annexed draft Contract. This draft will be tailored to reflect the proposals from the tender of the successful bidder and may be subject to change if necessary to reflect the requirements of NEF’s funders. The successful bidder will not be permitted to negotiate any of the terms of the contract, which will remain substantially as drafted. The successful bidders’ tender will be annexed to, and form part of, the Fund Management Agreement.
5.3 The principal requirements of the Successful Fund Manager will relate to:
5.3.1 making the fund available to, and stimulating demand from, businesses from all parts of the North East region;
5.3.2 performing all necessary tasks associated with the operation of the fund including (but not limited to): promoting the fund; receiving and assessing loan applications; issuing loan agreements; ensuring that repayments are made to NEF Subco; monitoring performance and managing defaults; reporting on all aspects of fund performance and output generation to NEF;
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5.3.3 commit sufficient human resources to the operation of the fund to ensure that it achieves its targets and operates successfully. The individuals who deliver the fund must have relevant qualifications and experience. Two or more individuals who are central to the successful delivery of the fund will be identified as “Key Persons”, and the fund manager will be required to secure the consent of NEF and the European Investment Bank to their replacement in the event that they leave the fund manager or materially reduce the time committed to delivery of the Microloan Fund;
5.3.4 ensuring that appropriate oversight and standards of corporate governance are maintained in relation the operation of the fund;
5.3.5 undertaking appropriate due diligence on applicants, of a level proportionate to the proposed size of the loan and the nature of the business proposition under consideration. In their tender submissions, bidders should describe their proposed approach to undertaking due diligence;
5.3.6 adopting a robust and transparent process for making decisions on loan applications, with oversight and input from individuals with relevant qualifications and experience of business lending;
5.3.7 ensuring that any conflicts of interest (in relation to prospective loans from the Microloan Fund, and generally) are identified and managed appropriately;
5.3.8 ensuring that the fund is managed in full compliance with all applicable laws, regulations and contractual requirements. These include compliance with (and holding the appropriate authorisations required under) the Consumer Credit Act1974, the Data Protection Act 1998, Money Laundering Regulations 2007 and the requirement, effective from 1 April 2014, to be registered with the Financial Conduct Authority for the purpose of carrying out consumer credit-related business;
5.3.9 generating enquiries, sourcing loan applications and directing potential applicants to any investment readiness support which is available;
5.3.10 use NEF’s online monitoring and reporting system, to log all applications and details of all loans made, and to issue output questionnaires on a biannual basis to all borrowers, to facilitate the collection of output data required by NEF’s funders;
5.3.11 provide monthly and quarterly reports on fund activity and performance to NEF, in the format and within the timescales required by NEF. Please see clause 19 of the draft Fund Management Agreement for further detail;
5.3.12 maintain detailed and accurate records of the fund’s activities and to ensure that all loan documentation and monitoring records and evidence are retained to satisfy the requirements of NEF’s funders, including the ERDF;
5.3.13 comply with all branding and marketing guidelines relating to the fund provided by NEF;
5.3.14 comply with the audit requirements of all funders and their representatives;
5.3.15 liaise and collaborate with relevant organisations and groups across the North East to maximise awareness of and applications to the fund.
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6 The Microloan Fund in the Context of NEF’s FBNE Portfolio
6.1 As detailed in section 1, above, NEF established six funds in 2010 which are managed by five different fund managers. Each fund has distinct investment policies which are designed to target separate – but slightly overlapping – business stages and market segments of the early stage / SME funding market.
6.2 The average investment size of the other FBNE funds is significantly higher than the £50k upper limit of the Microloan Fund. The funds which make some investments at lower values in the region of £50k (predominantly the Proof of Concept and Angel Funds) generally seek to make equity investments in pre-revenue businesses with high growth potential.
6.3 There is therefore little overlap between demand for the other funds in NEF’s portfolio and for the Microloan Fund but some businesses have, after receiving a loan from the Microloan Fund, progressed to raising larger funding rounds from other FBNE funds. Helping to facilitate business growth is a key objective of the Microloan Fund and so such progression is a positive outcome.
6.4 The Microloan Fund is however not intended to be used to provide leverage for other FBNE fund investments and therefore is precluded from completing a loan at the same time, or within six months before or after, another FBNE fund invests – except with the prior consent of NEF.
6.5 Any bidder which has a contract to manage or deliver any funds or financial products which could potentially compete with, or divert applications from, the FBNE Microloan Fund (including the current managers of any other FBNE funds) must in their tender submission provide details of how such potential conflict of interest / deal allocation decisions will be managed.
6.6 A key benefit of the FBNE fund-of-fund structure is that NEF, as the holding fund manager, can allocate and reallocate investment capital in response to market demand and fund manager performance. The six FBNE funds other than Microloan Fund are each expected to receive allocations of capital from the £17.5m of additional grant funding referred to at paragraph 1.7, above. This should enable each of them to continue investing throughout 2015. If any invest more slowly than required to secure full deployment by 31/12/15, NEF will re-allocate capital to other funds in its portfolio, potentially including the Microloan Fund.
7 Operational and Legal Structure of FBNE Microloan Fund; NEF’s Role
7.1 The principal features of the legal and operational structure of the Microloan Fund are (and will remain) as follows:
7.1.1 except as detailed in paragraphs 7.1.3 and 7.1.6, below, all activities relating to the operation of the Microloan Fund are undertaken by the fund manager as agent for NEF (Subco);
7.1.2 the activities undertaken by the fund manager include (but are not limited to): sourcing applications; discussing them with the potential applicants; assessing applications; informing applicants whether they have been successful; arranging for each loan to be disbursed to the borrower; monitoring the performance of borrowers following disbursement; liaising with borrowers in relation to performance and any missed repayments; if necessary, negotiating and agreeing adjusted repayment terms with
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borrowers; taking any appropriate legal action for repayment against defaulting borrowers;
7.1.3 all loan monies are disbursed direct by NEF (Subco) to the borrowers – the fund manager does not take custody of loan capital or interest or capital repayments at any point. Once the fund manager has entered into a loan agreement with a borrower, it submits a loan draw-down notice to NEF which sets out details of the transaction including: the name and bank account details of the borrower and the amount of the loan. (Please see schedule 5 of the attached draft Fund Management Agreement for the format of the loan draw down and pre-investment reporting checklist which are submitted by the fund manager and reviewed by NEF for every Microloan Fund loan.) NEF checks the details then instructs an electronic transfer of the loan monies direct to the borrower’s bank account;
7.1.4 all loans are made by the fund manager as agent for, and in the name of, NEF’s wholly-owned subsidiary North East Finance (Subco) Limited;
7.1.5 the loan agreement obliges borrowers to make repayments via direct debits direct to NEF (Subco) – to one of NEF (Subco)’s bank accounts held with Barclays Bank, which the fund manager is able to access, to monitor repayments;
7.1.6 all un-invested fund capital is controlled by NEF, which performs all treasury and idle funds management functions. Once loans are completed, the fund manager is responsible for all credit control and loan recovery functions; repayments are made direct to the account of NEF (Subco);
7.1.7 as part of the European Investment Bank’s security structure, NEF assigns its interest in the Microloan Fund management agreement to the EIB so that if NEF is in default, the EIB can assume responsibility for the contract. The Successful Fund Manager will be required to sign a formal acknowledgement of notice of this assignment as a condition of entering into the Contract.
7.2 As loans are made in the name of NEF (Subco), NEF held a Consumer Credit Act licence from the Office for Fair Trading. NEF now has the interim, transitional permission from the Financial Conduct Authority to continue making loans governed by the Consumer Credit Act. Bidders will be required to demonstrate that they hold or will be able to secure by July 2014 the requisite FCA permission to conduct such business. (All loans made by the Microloan Fund are (and must continue to be) made strictly for business and not personal purposes but as some loans are made to sole traders it is necessary to comply in those cases with the Consumer Credit Act.)
7.3 Bidders are also required to hold appropriate registrations and have in place appropriate systems to ensure compliance with both the Data Protection Act 1998 and the Money Laundering Regulations 2007.
7.4 The principal functions which NEF performs as the holding fund manager are:
7.4.1 establishing and procuring fund management services for investment funds;
7.4.2 monitoring the performance of the fund managers against the requirements of the fund management contracts;
7.4.3 marketing the portfolio of FBNE funds as a whole and directing people of make funding enquiries direct to NEF to the appropriate fund(s) within the
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FBNE portfolio, depending on the stage, sector and funding requirement of the potential applicant businesses;
7.4.4 reporting on the performance of the portfolio of funds to the funders (the Department for Communities and Local Government, in relation to ERDF; the European Investment Bank; the Department for Business, Innovation and Skills / British Business Bank) and other stakeholders including the Local Enterprise Partnerships and councils which serve the North East region;
7.4.5 monitoring market demand for the financial products offered by NEF portfolio of funds with a view to allocating additional capital (or reducing allocations of capital) to individual funds;
7.4.6 performing the treasury management function in relation to un-invested capital and disbursing cash to each fund as required to complete investments;
7.4.7 monitoring investments to check compliance with the eligibility rules, state aid regulations and other compliance related issues and providing guidance to fund managers in relation to these rules where appropriate;
7.4.8 reviewing the management of any conflicts of interest which a fund manager has in respect of any individual investments.
7.5 NEF liaises with its fund managers on a regular basis and aims to work with each of them on an open and cooperative basis.
7.6 NEF undertakes various PR and marketing activities to promote and raise awareness of its FBNE suite of funds as a whole. This includes engaging a Tees Valley Business Manager who has a specific remit to raise awareness of the FBNE funds, and provide sign-posting services to individual funds, within the Tees Valley area.
8 Transition of Contract from the incumbent to the New Fund Manager
8.1 Due to circumstances unconnected to the Microloan Fund, the current fund manager will cease to manage the fund around (or prior to) the end of June 2014, at which point the current fund management contract will terminate.
8.2 The current fund manager is working with NEF to help to ensure that the transition to the new manager will be as smooth as possible. All relevant documentation and records relating to the fund and the portfolio (including loan agreements, repayment histories, borrowers’ contact details etc.) will be passed to the Successful Fund Manager immediately following appointment.
8.3 The attention of Bidders is drawn to the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended ("TUPE"). In some cases, where work carried out by one contractor is subsequently awarded to another organisation, such a transfer of work may constitute a "transfer of an undertaking" for the purposes of TUPE.
8.4 TUPE provides that where there is a transfer of an undertaking, the new employer takes over any employment liabilities and the responsibility for the employment contracts of the employees, who then transfer on their previous terms and conditions of service.
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8.5 NEF expects that TUPE will apply to the following members of staff who remain employed by the current fund manager and who have devoted all, or the majority, of their working time to the Microloan Fund contract:
Job Title Date Employment with Entrust CommencedHead of Funds July 2011Portfolio Manager September 2007Lending Executive1 January 2013Lending Executive2 May 2013
8.6 At the time when this Invitation to Tender was published, NEF expected that the above individuals will be entitled to transfer in accordance with TUPE to the new fund manager following its appointment. It will of course be for each individual to decide if he or she wishes to do so. NEF’s preference is for the current team to continue to work on the contract following the appointment of the Successful Fund Manager. Their knowledge of the existing portfolio, the market and the performance of the fund to date should be beneficial to the new fund manager and maintaining continuity should help to prevent avoidable increases in non-performance of existing loans.
8.7 As referred to in paragraph 5.3.3, above, the successful bidder will be required to identify two or more individuals who are key to the successful delivery of the Microloan Fund as ‘Key Persons’. In the event that any of the Key Persons subsequently leave the organisation or materially reduce their time commitment to the Microloan Fund, the Successful Fund Manager will be required to propose a replacement for that Key Person who must be satisfactory to both NEF and to the European Investment Bank.
8.8 The current fund manager’s Head of Funds is a Key Person under the current contract. He has significant prior experience in both the banking and social investment sectors. In the event that he becomes employed by the successful bidder (in accordance with the TUPE regulations), he would be an appropriate candidate to become a Key Person under the new Contract.
8.9 The following summary of the principal terms of the employment contracts of the above Microloan Fund team members is provided to allow bidders to reflect the anticipated financial implications of TUPE in their tenders:
Aggregate of the Annual Salaries of the Four Team Members
£120,000
Entitlement to bonus payments NonePayment Interval MonthlyPlace of employment Newcastle upon TynePension Provision Stakeholder at 5% or 3.5% Employer ContAnnual Leave Entitlement 30 days plus 8 bank holidaysNotice Period to Terminate Contract 3 months Entitlement to any enhanced redundancy, maternity, paternity or sickness leave
None – statutory entitlements only
Other benefits None other than £60pa contribution to private health insurance scheme.
8.10 Bidders are solely responsible for taking the information provided in this ITT into account when submitting their proposals. NEF does not give any warranty as to the
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accuracy or completeness of such information, and will not indemnify the successful bidder against any liabilities which arise as a consequence of the operation of TUPE.
8.11 The application of TUPE is a matter for each bidder to clarify with their legal advisers.
8.12 NEF’s expectation is that the current fund manager will continue to manage the Microloan Fund until the new fund manager is appointed. It is however possible that the current fund manager may enter into a merger or restructuring transaction which will require, due to the procurement regulations, that the contract terminates earlier. In that event, NEF will ensure that portfolio management activities continue but it is likely that there will be a hiatus in new lending activity. In any circumstances, it is probable that TUPE will apply to the members of staff detailed above.
9 Instructions for Bidders
9.1 Please review the below instructions and those set out at Appendix 1 carefully.
9.2 Appendix 2 (Tender Proposal Questionnaire) contains a series of questions which bidders must respond to in order to outline their proposals for delivering the Contract, and their suitability to perform the role of fund manager. The questions cover the following broad areas:
1. Technical merit – demonstrating the capability of the organisation to deliver the Contract as specified, including knowledge of microfinance practice, management and staffing arrangements and the quality, technical merit/expertise of staff who may be deployed on the contract, organisational resources, experience of delivering similar contracts etc.
2. Proposed approach to fund delivery – Specific proposals for the delivery of the Microloan Fund, including suggested delivery model, business process, arrangements for sourcing enquiries and applications, approach to investment appraisal, etc.
3. Price and cost effectiveness - Total proposed management fees; arrangement and monitoring fees; start-up and other costs for the delivery of the fund.
9.3 Bidders should prepare a single ‘Tender Proposal Document’ which provides responses to each of the questions in Appendix 2. The document must be structured and presented under the headings 1 to 3 listed above, with the response to each individual question presented clearly under the wording of each question, which must be reproduced in your Tender Proposal Document.
9.4 Three hard copies of all tender submissions must be returned to NEF Holdco, as detailed in Appendix 1.
9.5 Electronic copies of the documents should be submitted as a single MS Word or PDF document, which should be named using the following format:
‘FBNE Microloan Fund Tender - (insert your organisation’s name) - (insert date)’
9.6 If due to excessive file size, it is necessary to submit more than one file, each file should be clearly named by including “File 1”, “File 2” etc. as appropriate in the file name.
9.7 You must supply only the information and documents requested specifically in these instructions and at Appendix 1. Do not submit additional supporting information which has not been requested. It will not be taken into account during the tender
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assessment process. Bidders must comply with any word or page limits stated. Failure to do so will result in [a non-compliant bid / any additional information over and above the limit specified not being taken into account].
10 Criteria For Contract Award
10.1 NEF intends to award the contract to the proposal that is most economically advantageous.
10.2 As part of the evaluation process, Bidders will be required to satisfy any mandatory requirements set out at Appendix 3. Bidders are asked to note that Appendix 3 will not be scored but NEF reserves the right to reject any bidder who indicates that they are or will be unable to meet any of the mandatory requirements outlined in the Organisation Information Questionnaire.
10.3 Bidders are required to complete the Tender Proposal Questionnaire. The assessment for Sections 2 and 3 of the Tender Proposal Questionnaire will be made against the following contract award criteria. Bidders should note that although the information outlined in section 1 of the Tender Proposal Questionnaire will not be directly scored, the information provided in response to each of those questions may be considered to the extent that they supplement, contradict or verify the information given in response to section 2.
Award Criteria Sub-CriteriaWeighting
MaximumScore
Section Weighting
Proposed Approach to Fund Delivery
60%
2.1 Delivery model 8 402.2 Resourcing of contract 16 802.3 Approach to sourcing investments 4 202.4 Business process 4 202.5 Investment appraisal, risk and conflict management and lending decisions
4 20
2.6 Approach to minimising loan default 4 202.7 Approach to maximising non-financial outputs
4 20
2.8 Fund financial returns 4 202.9 Compliance with IOGs and legislation 4 202.10 Approach to rapid re-launch of fund 8 40Price and cost effectiveness3.1 Pre-existing portfolio management fee 7.5 37.5
40%3.2 Re-launched fund activities fee 20 1003.3 Arrangement and monitoring fees 5 253.4 / 3.5 Set-up costs and other fees and costs 7.5 37.5Total 100 500 100%
10.4 The proposals which will be evaluated under each award criteria are those which bidders include in their Tender Proposal Document in response to the questions in Appendix 2, which correspond to the numbering in the above table.
10.5 Each response to the questions in sections 2 and 3 of the Tender Proposal Questionnaire (attached as Appendix 2) will be awarded a score from 0 to 5 (in
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accordance with the following scoring principles), to which the relevant weighting set out in the above table will be applied:
Score Scoring Principles0 Unaddressed – no response to the question has been given1 Unacceptable – the proposals are wholly inadequate2 Significant Reservations – the requirements are not fully
addressed and/or the proposals clearly do not satisfy the requirements
3 Minor Reservations – the response addresses all requirements but is unsatisfactory in respect of some aspects
4 Fully Meets Requirements – the response fully and satisfactorily meets the requirements
5 Exceeds Requirements – the response meets and usually exceeds the requirements
To illustrate how the scoring system will be applied:
A response to question 2.10 (Approach to rapid re-launch of fund):
Which is awarded a score of 1, receives 8 points (i.e. 1 x weighting of 8) – which equates to 1.6% (i.e. 8 out of 500 maximum total points)
Which is awarded a score of 3, receives 24 points (i.e. 3 x 8) – which equates to 4.8%
Which is awarded a score of 5, receives 40 points (i.e. 5 x 8) – which equates to 8%.
11 Timetable
11.1 The anticipated timetable for the procurement process is set out in Appendix 1. NEF expects the Successful Fund Manager to begin managing the fund as soon as reasonably practicable following the award of the contract, hopefully during July 2014.
11.2 As detailed in Appendix 1, the contract award is subject to the final approval of the European Investment Bank – which is a precondition of NEF’s ability to award the contract and not a further evaluation of the fund manager.
12 Queries
12.1 Any queries and requests for clarification in connection with this tender should be submitted by email to: [email protected]
12.2 To ensure a fair and transparent tender process no approach of any kind in connection with this tender (other than as identified above) should be made to any person within, or associated with, NEF. Failure to comply may result in disqualification from the process.
13 Incomplete Tenders
13.1 Tenders must be submitted in accordance with the instructions in this ITT and its appendices. NEF may not consider tenders submissions that do not contain all information, documents and particulars requested.
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14 Tender Validity
14.1 Tender submissions should remain open for acceptance for a minimum of 90 days from the tender submission deadline.
15 Right to Reject Tenders and Cancel Tender Process
15.1 NEF reserves the right to cancel the tender process and reject all tenders at any time prior to the award of the Contract. The issue of this ITT in no way commits NEF to enter into any contract pursuant to this tender process
15.2 NEF reserves the right, in its absolute discretion, to disqualify any submission that does not, in NEF's opinion, comply with the requirements of the ITT or any other requirement of NEF in connection with the ITT process.
16 Tenders Prepared and Submitted at Cost of Bidders
16.1 NEF shall not accept any liability for any costs resulting from the cancellation of this tender process nor for any other costs incurred by those tendering, who do so at their own expense.
17 English Language
17.1 English shall be the official language for all means of communication between Bidders and NEF on all matters relating to this procurement.
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Appendix 1
Important Information and Instructions for Bidders
NEF is operating the procurement process to appoint the new FBNE Microloan Fund manager in accordance with the ‘open procedure’, under regulation 15 of the Public Contracts Regulations 2006 (Regulations).
NEF is committed to the principles enshrined in the Regulations: to treat all bidders equally and in a non-discriminatory way and to act in a transparent and fair way.
To help ensure that all bidders are treated equally and fairly, all queries in relation to the procurement process or the ITT documents must be submitted to NEF by email, to: [email protected]. Any responses to queries which NEF Holdco intend to issue and which may be relevant to all bidders will then be circulated simultaneously to every party which supplies an email address to NEF Holdco for this purpose. If you want to receive this information, please send an email with the subject “Micro Clarifications” to [email protected] and state in the email which email address NEF Holdco should use to inform you of such clarifications.
NEF aims to respond to queries as soon as possible. Queries must be submitted no later than midday on Tuesday 20th May 2014.
NEF reserves the right to cancel this procurement process and/or to reject all tenders at any time prior to the award of the contract. NEF shall not accept any liability for any costs resulting from the cancellation of this process nor for any other costs incurred by those tendering, who do so at their own expense.
This ITT has been compiled and is made available in good faith. No warranty is given as to the accuracy or completeness of the information contained in it and any liability or any inaccuracy or incompleteness is therefore expressly disclaimed by NEF.
Any queries on the documentation issued must be raised before tender return and should not be raised in any tender. Tenders may not be conditional in any way.
Each bidder is required to notify NEF of the occurrence of any of the events listed below (each a “Change in Circumstance”) immediately upon becoming aware of any of the following events:- any change to its corporate structure- any change to the information provided to NEF as part of its ITT response- any other changes to its circumstances, or the basis of its tender, which may be expected
to influence NEF's decision on the suitability of that bidder to enter into the Contract.
NEF reserves the right to disqualify a bidder following a Change of Circumstance, or to impose such conditions as it considers appropriate.
Each bidder’s acceptance of delivery of this ITT constitutes its agreement to and acceptance of the terms set out in this Appendix 1 and other terms of this ITT.
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Submission of Tenders
Three hard copies of your tender submissions must be submitted to NEF, marked for the attention of Alastair Smith, by no later than Noon on Tuesday 27 May 2014. The documents which must be included with all tender submissions are:
1. your Tender Proposal Document response to the Tender Proposal Questionnaire (Appendix 2);
2. your responses to the Organisation Information Questionnaire (Appendix 3);3. the Form of Tender (Appendix 5), duly completed and signed.
Any tenders which are received after the deadline or which are incomplete may be rejected and not considered by NEF. NEF may, at its sole discretion, extend the closing date – on the basis that the extension would apply (and be communicated to) all prospective bidders.
Please also supply electronic copies of your tender submissions, either on a memory stick or a CD Rom, enclosed with the hard copies. The electronic copy must be identical to the hard copy submissions. The hard copy submission will be the definitive version of all tenders for the purposes of the evaluation.
Contract and Timetable
The form of Contract which the Successful Fund Manager will be required to enter into is annexed to this ITT or otherwise supplied with it. Some provisions of the Contract will be derived from the successful bidder’s tender, in particular as regards remuneration.
The successful bidder will be required to execute the contract within 14 days of award (or such later date as decided by NEF); no negotiations on contract terms are permitted under the Regulations. NEF does however reserve the right to amend the contract to take into account any terms and conditions applied by NEF’s funders and/or which are required by any regulatory changes.
It will also be necessary for the successful bidder to provide a formal legal opinion from its solicitors confirming that it has the capacity and authority to enter into, deliver and perform the Contract, and any such further information or documentation as may be required by the European Investment Fund.
NEF would like the successful bidder to begin managing the FBNE Microloan Fund as soon as reasonably practicable following the award of the Contract. In the Tender Proposal Document, bidders are asked to describe their approach to rapidly assuming full operational management of the fund and commencing marketing and new lending activities. Bidders should aim to being making investments as early as possible in the third quarter of 2014.
The Successful Fund Manager will be expected to make loans across the active investment period from the start of the contract until 31 December 2015 and then to manage-out the portfolio and wind up the fund over the following 4 years. The contract will therefore be for a period of approximately 5.5 years, but NEF reserves the right to extend this by up to a year and to increase the capital allocated to the fund by a maximum of £2.5m. Any adjustment to the contract duration or capital allocation will be accompanied by a commensurate change to fund management fees and outputs required, which will be effected in accordance with the provisions in the Contract (see in particular Schedule 6) and the terms of the fund manager’s tender.
An indicative timetable for completing the procurement process is set out below. This is intended to be a guide and, whilst NEF does not intend to depart from the timetable, it reserves the right to do so at any stage
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Event Date / Approximate Date
Contract Notice Sent to OJEU 16 April 2014
Deadline by Which Tenders Must Be Submitted to North East Finance
Noon on 27 May 2014
Possible Presentations by Bidders w/c 2 June or 9 June 2014
Final Selection of Successful Bidder and Start of Mandatory Standstill Period
w/c 16 June 2014
Contract Completed July 2014
Basis of Contract Award
NEF will award the Contract to the bidder which achieves the highest score when the award criteria set out in the ITT document are applied to bidders’ responses to the Tender Proposal Document.
All bidders are also required to complete and submit to NEF the Organisation Information Questionnaire (Appendix 3). If a bidder indicates that it has contravened any of the discretionary exclusion criteria then that bidder’s Tender Document responses may not be evaluated and the bid may be rejected. Otherwise, the information supplied in response to the Organisation Information Questionnaire will be used to assist NEF in a financial due diligence exercise undertaken by or on behalf of it or the European Investment Bank.
Any decision by NEF to award a contract to a fund manager is subject to the approval of the European Investment Bank, which may undertake or instruct due diligence on bidders. The final decision to award the contract to the fund manager is therefore subject to the fund manager successfully completing the a due diligence assessment. This due diligence assessment does not represent a further evaluation of the fund manager but as it is condition precedent to the EIB’s agreement to make funds available to NEF, it represents a precondition to NEF’s ability to award the contract. NEF would like to encourage the maximum number of organisations to bid to be the fund manager and as such will work with bidders to ascertain how any issues or concerns arising from any due diligence reviews can be addressed.
As indicated in the above timetable, NEF anticipates that it might be necessary to invite all or some bidders to present their tender proposals to a meeting of evaluators and stakeholders. Where the evaluators consider that it is necessary to meet with a bidder to seek clarification of their proposals and / or support / verification of their written submissions, such bidders will be invited to give a presentation and to answer questions from evaluators. The presentations will not be evaluated but instead will be used as appropriate to enable evaluators to seek clarifications of the written tender submissions. Bidders are therefore requested to ensure that any individuals from their organisation who would be key to delivering the Fund are available to attend a presentation / Q&A session in Newcastle upon Tyne during the weeks commencing 2 and 9 June 2014.
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Appendix 2
Tender Proposal Questionnaire
Please answer all of the questions below in your ‘Tender Proposal Document’, as described in the Invitation to Tender.
1. TECHNICAL ABILITY
The purpose of the questions in this section is to allow you to demonstrate the capability of your organisation to deliver a contract of this type. Your response to the questions in section 1 will not be scored or used to determine whether to award a contract but each of them may be considered to the extent that they supplement, contradict or verify the information which you give in response to the questions in section 2 of this Appendix.
1.1 Your main business activities
What are the main business activities of your organisation? How many staff do you employ? What premises do you currently trade from?
1.2 Partners and sub-contractors
Do you intend to deliver all aspects of the contract directly or will some elements be delivered by sub-contractors or partners?
Please include a diagram setting out the relationships between your organisation and any partners and sub-contractors you intend to work with.
Please list all of the organisations that will be involved directly in delivering the contract and provide a brief outline of their main business activities and how many staff they employ.
1.3 People
NEF is keen to ensure that appropriately resourced fund managers are appointed to manage all FBNE investment funds. On this basis, please provide the following information:
Organisational chart(s) identifying all of your existing staff who may be involved in the delivery of this contract.
Please provide key information and a summary of the educational and professional qualifications of all of your current managerial and delivery staff who may be involved in carrying out or overseeing work under the contract, including:
Name Job title / function Summary jobs description Employment location Short CV / biography summarising key skills, knowledge and experience relevant to
this contract.
1.4 Relevant Prior Experience
Please provide details of up to three recent contracts you have delivered that are similar in scale and relevant to the fund management services being procured. If you cannot provide details for three contracts, please explain why.
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Each contract/project description should be related to demonstrating your experience and capability to meet the needs of this contract, and should be no more than 500 words in length. Please include the following information (1) contract description, detailing the roles and responsibilities of your organisation; (2) when and where the services were carried out, contract value and the buyer; (3) key results and outcomes delivered (4) confirmation that the services were carried out in accordance with the contract and successfully delivered.
The contract for which this ITT has been relates to a fund which has been delivered previously by another party and will require the successful bidder to familiarise itself with and assume responsibility for an existing portfolio of investments, as well as re-launching the fund and potentially also taking-on staff from the current fund manager. Bidders should therefore identify any previous experience relevant to these aspects of (in effect) taking over an existing contract.
1.5 Professional Accreditations and Authorisations
Please detail the professional authorisations and accreditations held by your business (and by any sub-contractors or partners you intend you engage in delivering the fund) and employees which are required or relevant to the provision of services under this contract. Please explain your approach to securing any such authorisations or accreditations if not currently held.
2. PROPOSED APPROACH TO FUND DELIVERY
The purpose of the questions in this section is to provide you with an opportunity to describe your proposed approach to the delivery of the FBNE Microloan Fund.
Where your proposed approach includes working with partners or sub-contractors, it is important that you explain throughout this section specifically how they will be involved.
2.1 Delivery model
Please describe the overall delivery model you propose to employ in operating the fund. This must include details of the location(s) within the North East of England from which you will deliver the fund – whether premises you already occupy or your proposals of where you will establish a presence if you do not currently have one in the region.
2.2 Resourcing of the Contract
Please provide details of the level of resourcing which you will devote to the fund and, where possible, details of the individuals who will deliver the fund.
As detailed in paragraph 8 of the main section of this ITT, four members of staff of the incumbent fund manager are currently delivering the Microloan Fund. For reasons unconnected with the Microloan Fund, several team members who were previously involved in delivering the Micorloan Fund have recently left the incumbent fund manager. Bidders should not therefore make any assumptions or base any decisions regarding the adequacy of resourcing of the fund on the number of members of staff who may have a right under TUPE to transfer to the employment of the successful bidder following appointment.
As detailed at section 8 of the main part of this ITT, the four individuals currently delivering this contract are likely to have a right under the TUPE Regulations to continue to be engaged in delivering the FBNE Microloan Fund by the new fund manager.
Given that the remaining duration of the Microloan Fund’s lending phase is relatively brief, and the familiarity of the existing staff with the fund’s portfolio, market and operating
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procedures, NEF is keen to ensure consistency and continuity across the overall fund. Scores in the evaluation of this section, and section 2.10, will reflect this preference.
In answering this question, please provide details of the personnel who will undertake each of the following functions:
- New lending activity- Lending Committee- Portfolio management / loan collections / debt recovery activity- Accounting, Finance, Reporting to NEF- Risk and Compliance Functions- Marketing- Administration
Please detail the hours per week (or percentage of working time – specifying whether full time, part time or other engagement) which the person performing the function will devote. Where this will vary between the active lending phase (to 31/12/15) and the portfolio phase (post 31/12/15), please indicate the time commitment during each phase or each year of the contract.
Where possible, please identify named individuals. Where appropriate, please refer either to the staff currently involved in delivering the fund (the individuals identified by job title at section 8, above) or give an indication of the qualifications and/or experience of the individuals who you will recruit to undertake the work. Please detail your recruitment strategy (including timetable) for any new team members that will, or may, need to be recruited to deliver the contract.
Bidders must also propose who would be the Key Persons for the purposes of the Fund Management Agreement (i.e. the individuals who are key to the successful management of the fund, who must be approved by NEF and the EIB as such, and whose replacements (should they leave) must receive the prior approval of NEF and EIB.
Your tender proposal will form part of the Contract and you will be required to maintain the level of resource proposed in your tender when operating the fund.
2.3 Approach to Sourcing investments
What would be your approach to sourcing investment enquiries and applications for the fund?
Include a description of the networks you have / would put in place to support deal flow, along with your prior experience of developing and managing similar networks.
Please provide specific information regarding how you will stimulate applications from each of the following sub-regions within the area covered by the fund:
2.3.1 Northumberland2.3.2 Tyne & Wear2.3.3 County Durham2.3.4 Tees Valley
Please consider specifying any specific approaches which will be taken to stimulating applications from the major population centres and business districts within each sub-region, e.g. Berwick upon Tweed, Hexham, Morpeth, Ashington, Gateshead, Sunderland, Durham, Hartlepool, Darlington, Middlesbrough etc.
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Please specify any differences in approach which you will take to sourcing applications for loans at the lower end of the Fund’s lending parameters (sub £10k) and for loans at the higher end (£25k to £50k).
Please also describe your proposed approach to promoting the fund, including your proposed marketing budget.
In the monthly reports which you supply to NEF, you will be required to detail the fund marketing / deal generation activities which you undertake each month in accordance with the proposals made in response to this question.
2.4 Business process
Please illustrate the process / stages that a ‘typical’ applicant will move through in accessing the fund.
2.5 Investment appraisal; risk and conflict management and lending decisions
Please describe your proposed process for conducting investment appraisal and due diligence, from initial assessment through to completion.
Describe the approach and philosophy you will employ in managing risk. How will you balance the need to ensure the fund achieves a good return on investment against the need to lend at the required volume to businesses which (due to their stage of development and the fact that they have been unable to secure sufficient funding from mainstream sources) are relatively high risk.
Please also describe the decision making process you will put in place to consider each loan application submitted. This should include a description of who will be involved, and the safeguards you will put in place to ensure effective and transparent decision making.
Please provide detail for how you will manage any potential conflicts of interest which could arise as result of your other current or previous activities, in relation e.g. to potential applications from companies in which you have a live investment from other funds under your management, or in relation to deal allocation where you have a current contract to manage or deliver other funds or schemes which applicants could potentially access instead of accessing funding from the FBNE Microloan Fund.
Include a description of how this compares to the approach employed for any funds you manage currently / have managed in the past.
Please note, the process proposed by the successful bidder will be reflected in their contract with NEF.
2.6 Approach to minimising loan default
Please describe the approach you will use to minimise and manage loan default, in relation both to the pre-existing portfolio and to the portfolio which you will build up when making new loans following appointment.
In relation to the latter, please specify the average loan default rate you expect to experience, the assumptions and calculations your figures are based on, and what evidence you have that it is a reasonable estimate.
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What arrangements will you put in place for recovery of outstanding debts where the borrower defaults and / or the business fails. Please provide an estimated budget for any additional costs, outlays and expenses associated with these actions.
2.7 Approach to maximising non-financial outputs
As detailed in the main section of this ITT, the FBNE Microloan Fund is intended to achieve significant economic benefits as well as financial returns. In providing access to finance to people and businesses who are otherwise unable to secure it, it helps to increase economic activity and to catalyse business creation. Maximising these outcomes is a critical component of the delivery of the fund, and capturing the outputs in a manner which satisfies NEF’s funders is equally important.
NEF operates an online output monitoring system which requires all recipients of funding from the FBNE Microloan Fund to complete and submit a brief report every six months. NEF will provide guidance and training to the successful fund manager on the operation of the online system and the requirements for fully evidencing outputs.
The outputs achieved by the fund to date are summarised at section 2.6 in the main part of this ITT. The total output targets (i.e. outputs achieved by the fund to date plus those achieved by lending the balance of the £6.5m capital) are: 690 new jobs created; 643 jobs safeguarded and 728 SMEs assisted.
Please specify your approach to lending the remaining fund capital to maximise the outputs achieved. The fund should in particular target prospects which will create or safeguard jobs with an annual salary of £20k+, and you should set out your approach to achieving, monitoring and evidencing the achievement of these targets.
2.8 Fund Financial Returns
Please answer the following question in respect only of the new-lending activity which, if successful, you will transact as fund manager. Please assume that the total capital loaned will be £2.5m.
What do you estimate will be the gross return on investment on the £2.5m, and what arrangements will you put in place to ensure this level of return is achieved in practice? Please provide a completed table in the following format.
Active Lending Phase Realisation Phase
2014(Q3/4)
2015 H1 2015 H2 2016 2017 2018
Cash returnedCapitalInterestTotal
InvestmentsOpening positionInvestments madeRepaidDefaultLoans outstanding
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Please also detail the approach you will take to maximising returns from the pre-existing portfolio.
2.9 Compliance with Investment & Operating Guidelines (IOGs) and Legislation
The Investment and Operating Guidelines (IOGs) form Schedule 2 to the Fund Management Agreement. They describe in detail the fund parameters and the approach that the Microloan Fund manager must adopt in delivering the fund.
Please describe the internal management arrangements you will put in place to ensure that the fund is delivered in line with the requirements of the IOGs. How will the activities of fund management staff be monitored and scrutinised?
Please detail your approach to ensuring compliance with the applicable regulatory framework, and in particular each of:
the Consumer Credit Act the state aid De Minimis regulation the Data Protection Act the Money Laundering Regulations
2.10 Approach to Rapid Re-Launch of Fund
Please provide a project plan illustrating your proposed approach to taking on responsibility for the fund, and to commencing lending activity as soon as possible following completion of the fund management contract. Please identify any constraints you may face, and how you would deal with them. Please identify the early steps you will take to stimulate demand for the fund.
Please outline your expectations regarding the current fund manager’s staff who, if you are awarded the contract, may be entitled to be employed by you by virtue of the TUPE regulations.
3. PRICE AND COST EFFECTIVENESS
3.1 Fund Management Fees
For the duration of the contract, NEF will pay the fund manager a management fee – which will be paid quarterly in arrears against invoices issued in accordance with the pricing proposals set out in response to (and in accordance with) this section.
As described in section 4 of the main part of this ITT, it is possible that the amount of capital available to successful bidder to lend to SMEs will be increased or decreased – depending on market conditions, the performance of the fund manager and on the capital available to NEF.
This contract requires the successful bidder to:
1. take on responsibility for managing the existing portfolio, acquired by the current fund manager. The exact number of borrowers and the capital loaned to them will not be known until the start of the new contract but the requirement in relation to this element will be fixed from that point. This requirement is referred to as Pre-Existing Portfolio Management or “PEP Management” and the fee element associated with it as the “PEP Fee”.
2. lend the balance of available capital, as increased or decreased, and perform the portfolio management role in relation to the resultant portfolio (referred to here as the
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“Re-launched Fund Activity” and the fee element associated with it as the “RFA Fee”.
For the avoidance of doubt, the distinction between PEP Management work and the PEP Fee and the Re-Launched Fund Activity and the RFA fee:
is being made solely for the purposes of establishing the appropriate fund management fee for the work required under the contract – given that one aspect only (the Re-Launched Fund Activity) may vary following the start of the contract
is not intended to have any implications for how bidders resource the contract does not imply that borrowers within the pre-existing portfolio should be treated
differently or experience any differences in relation to the operation of the fund compared to new borrowers.
Although bidders are required to propose a separate PEP Fee and RFA Fee, the aggregate amount will represent the fund management fee – which will be paid quarterly in arrears, pro rated as required to reflect:
The actual start date of the contract, once all documents are signed and all necessary consents from NEF’s funders have been secured. The successful bidder’s entitlement to be paid will begin from the date on which NEF confirms that the consents have been secured or (if later) from the date on which the successful bidder in fact begins work on the contract.
(in respect of the New Lending Fee) any increase or decrease in the amount of capital committed to the fund. In relation to an increase, the entitlement to be paid at the proportionately higher rate will begin from the date of formal commitment of the additional capital. In relation to a decrease, the proportionate reduction in the fee entitlement takes effect from the date which falls three months after the reduction is effective.
All fees must be quoted exclusive of VAT, which must be identified separately. Please note that the fees will not be index linked and you should frame your proposals accordingly.
3.1.1 PEP Fee
In respect of PEP Management work, please complete the following table with your proposed fixed PEP Fee:
PEP Fee Proposal:1 Year to 31 December 2014 £ [insert value]2 Year to 31 December 2015 £ [insert value]3 Year to 31 December 2016 £ [insert value]4 Year to 31 December 2017 £ [insert value]5 Year to 31 December 2018 £ [insert value]6 Total: £ [insert value]
Please note that you will be entitled to invoice ¼ of the relevant annual quoted PEP Fee, quarterly in arrears, during each quarter while the contract remains in place.
For the year to 31 December 2014, please provide a figure based on an assumed active contract period of 6 months (i.e. assume that the contract commences on 1 July 2014). You will be entitled to invoice a proportionate amount of that figure, based on the actual start date of the contract. If the contract in fact starts on 1 August 2014, the Q3 PEP fee will be: half of the figure quoted in Row 1, above, multiplied by two thirds.
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The actual number of active borrowers in the pre-existing portfolio, and total quantum of capital loaned to them, will not be known until the start date of the new contract. However, is not expected to vary materially from the following estimates, and so the PEP Fee proposals of bidders must apply irrespective of the actual position at the start of the contract.
The latest loans within the pre-existing portfolio are expected to be made in June 2014. The maximum term of a loan from the fund is three years and as such the PEP Management activity should be finished by the middle of 2017. However, to maximise returns, it may be necessary to agree reduced repayment profiles which extends the loan period. Decisions on re-profiling loans from the pre-existing portfolio will be made by the Successful Fund Manager, who will therefore be able to influence the final repayment dates for the pre-existing portfolio.
The estimated total capital loaned as at 1 July 2014 to the pre-existing portfolio is £4m, and the estimated number of active borrowers over the contract period (taking into account those which have (or will have) fully repaid and which have or are projected to be written off) are:
Estimated Number of Live SMEs in the Pre-Existing Portfolio at following dates:July 2014 270January 2015 160January 2016 105January 2017 50January 2018 25January 2019 0
3.2 RFA Fee
Please complete the following table with your proposed RFA fee, based on the assumption that £2.5m is to be lent from the start of the contract until 31/12/15, in accordance with the specifications set out in this ITT and the draft Fund Management Agreement:
RFA Fee Lending Phase Realisations Phase TotalH2 2014 2015 2016 2017 2018 2019
Value (£)
Please note that, as with the PEP Fee, you will be entitled to invoice ¼ of the relevant annual quoted RFA Fee, quarterly in arrears, during each quarter while the contract remains in place.
The RFA Fee proposed will apply (on the basis set out here) irrespective of the actual amount of available capital at the time when the contract starts – i.e. whether it is £2.6m or £2.4m. This is to provide certainty on pricing proposals and because the actual work involved will not be materially different due to relatively minor variations in available capital. It also enables NEF to maintain lending activity to greatest extent possible prior to the new fund manager starting to operate the fund, which will be beneficial to all stakeholders including the new fund manager.
In the event that additional capital is allocated to the fund, the amount of the RFA will increase proportionately with effect from the date of the increase. For example, if an additional £500k is allocated to the fund on 1 April 2015, the RFA which you can invoice will be:
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For quarters 2, 3 and 4 of 2015:
- The value set out in the table under “2015” * 1.2 [i.e. an increase of 1/5 – reflecting the increase of 1/5 in capital allocated to the fund] … and divided by 4
For each quarter in the realisations phase:
- 1.2 * the value set out under the relevant year in the above table, divided by 4.
The same principles will be applied in the event that any capital is de-committed from the fund. For example, if the capital available to the fund is reduced by £500k, the fee payable reduces by a fifth – with the reduction in fees taking effect three months after the reduction in fund capital take effect. Please see Schedule 6 of the draft Fund Management Agreement for further details in relation to the process of increasing or decreasing the capital allocated to the fund.
3.3 Arrangement and monitoring fees
Please state what (if anything) you propose to charge to borrowers by way of arrangement and monitoring fees. Note that any arrangement and monitoring fees you propose to charge will be included in the overall assessment of your pricing structure.
3.4 Set-up costs
Some limited provision has been made to cover the costs associated with establishing the Successful Fund Manager in its roles as the FBNE Microloan Fund manager. If you would like to request set-up costs, please provide an itemised breakdown.
3.5 Other fees and costs
Please describe any and all other fees or costs that you will claim in the course of managing the funds.
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Appendix 3
Organisation Information Questionnaire
1. BASIC DETAILS OF YOUR ORGANISATION
Question No.
Question Response Mandatory (Y/N)
1.1 Name of the organisation in whose name the tender would be submitted:
Y
1.2 Contact name for enquiries about this bid:
Y
1.3 Contact position (Job Title): Y1.4 Address and Post Code: Y1.5 Telephone number: Y1.6 Fax number: Y1.7 E-mail address: Y1.8 Website address (if any): N1.9 Company Registration number (if this
applies):Y
1.10 Charities or Housing Association or other Registration number (if this applies). Please specify registering body:
N
1.11 Date of Registration: Y1.12 Registered address if different from the
above: Post Code:N
1.13 VAT Registration number: N1.14 Is your organisation: (Please tick one) A Public Limited Company
A Limited CompanyA PartnershipA Sole TraderOther (Please Specify)
Y
1.14a If 'Other' Please Specify N1.15 Is the bidding organisation is part of a
legal group structure?YesNo
Y
1.15a If the bidding organisation is part of a group please describe the group structure and relationships.
N
1.16 Name of (ultimate) parent company (if this applies):
N
1.17 Companies House Registration number of parent company (if this applies):
N
1.18 Has any director or any other person who has powers of representation, decision or control of the organisation been employed by North East Finance?
YesNo
Y
1.18a If “Yes”, please provide details. N1.19 Does any director or any other person
who has powers of representation, decision or control of the organisation have a relative employed by North
YesNo
Y
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East Finance?1.19a If “Yes”, please provide details. N
2.1 CRITERIA FOR THE REJECTION OF ECONOMIC OPERATORS -MANDATORY EXCLUSION
Note: In accordance with the Public Contract Regulations 2006 (23(1)) North East Finance (Holdco) Limited on behalf of North East Finance (Subco) Limited, subject to paragraph 23 (2) of the Regulations, shall treat as ineligible and shall not select an economic operator on the following grounds.
Please indicate if the organisation named above (or its directors, partners or any other person who has powers of representation, decision or control of the organisation) has been convicted of any of the following offences:
Question No.
Question Response Mandatory (Y/N)
2.1.1 conspiracy within the meaning of section 1 of the Criminal Law Act 1977 where that conspiracy relates to participation in a criminal organisation as defined in Article 2(1) of Council Joint action 98/733/JHA;
YesNo
Y
2.1.2 corruption within the meaning of section 1 of the Public Bodies Corrupt Practices Act 1989 or section 1 of the Prevention of Corruption Act 1906;
YesNo
Y
2.1.3 the offence of bribery YesNo
Y
2.1.4 fraud, where the offence relates to fraud affecting the financial interests of the European Communities as defined by Article 1 of the Convention relating to the protection of the financial interests of the European Union, within the meaning of:
YesNo
Y
2.1.4.1 the offence of cheating the Revenue; YesNo
Y
2.1.4.2 the offence of conspiracy to defraud; YesNo
Y
2.1.4.3 fraud or theft within the meaning of the Theft Act 1968 and the Theft Act 1978
YesNo
Y
2.1.4.4 fraudulent trading within the meaning of section 458 of the Companies Act 1985;
YesNo
Y
2.1.4.5 defrauding the Customs within the meaning of the Customs and Excise Management Act 1979 and the Value Added Tax Act 1994;
YesNo
Y
2.1.4.6 an offence in connection with taxation in the European Community within the meaning of section 71 of the Criminal Justice Act 1993;
YesNo
Y
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2.1.4.7 destroying defacing or concealing of documents or procuring the extension of a valuable security within the meaning of section 20 of the Theft Act 1968
YesNo
Y
2.1.5 money laundering within the meaning of the Money Laundering Regulations 2003
YesNo
Y
2.1.6 any other offence within the meaning of Article 45(1) of the Directive 2004/18EC.
YesNo
Y
2.1.7 If any of the above listed offences do apply to your organisation, please give full details including any court actions and or industrial tribunal hearings.
Y
2.2 DISCRETIONARY GROUNDS FOR EXCLUSION
Note: In accordance with the Public Contract Regulations 2006 (23(4)) North East Finance (Holdco) Limited on behalf of North East Finance (Subco) Limited may treat an economic operator as ineligible or decide not to select an economic operator in accordance with the Public Contract Regulations 2006 on one or more of the following grounds.
Please confirm in respect of each of (1) the organisation; (2) its directors and (3) any other person who has powers of representation, decision or control of the organisation that: (IMPORTANT you must answer 'YES' if the statement is true):
Question No.
Question Response Mandatory (Y/N)
2.2.1 Being an individual he is not bankrupt or has not had a receiving order or administration order or bankruptcy restrictions order made against him or has not made any composition or arrangement with or for the benefit of his creditors or has not made any conveyance or assignment for the benefit of his creditors or does not appear unable to pay, or to have no reasonable prospect of being able to pay, a debt within the meaning of section 268 of the Insolvency Act 1986, or article 242 of the Insolvency (Northern Ireland) Order 1989, or in Scotland has not granted a trust deed for creditors or become otherwise apparently insolvent, or is the subject of a petition presented for sequestration of his estate, or is not the subject of any similar procedure under the law of any other state;
YesNo
Y
2.2.2 Being a partnership constituted under Scots law it has not granted a trust deed or become otherwise apparently Yes
Y
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insolvent, or is not the subject of a petition presented for sequestration of its estate
No
2.2.3 being a company or any other entity within the meaning of section 255 of the Enterprise Act 2002 has not passed a resolution or is not the subject of an order by the court for the company's winding up otherwise than for the purpose of bona fide reconstruction or amalgamation, or has not had a receiver, manager or administrator on behalf of a creditor appointed in respect of the company's business or any part thereof or is the subject of the above procedures or is not the subject of similar procedures under the law of any other state;
YesNo
Y
2.2.4 It has not been convicted of a criminal offence relating to the conduct of his business or profession
YesNo
Y
2.2.5 It has not committed an act of grave misconduct in the course of business or profession
YesNo
Y
2.2.6 It has fulfilled obligations relating to the payment of social security contributions under the law of any part of the United Kingdom or of the relevant State in which the economic operator is established
YesNo
Y
2.2.7 It has fulfilled obligations relating to the payment of taxes under the law of any part of the United Kingdom or of the relevant State in which the economic operator is established
YesNo
Y
2.2.8 It is not guilty of serious misrepresentation in providing any information required of him under this regulation
YesNo
Y
2.2.9 in relation to procedures for the award of a public services contract, is licensed in the relevant State in which he is established or is not a member of an organisation in that relevant State when the law of that relevant State prohibits the provision of the services to be provided under the contract by a person who is not so licensed or who is not such a member
YesNo
Y
2.2.10 Where applicable, it is registered with the appropriate trade or professional register(s) in the EU Member State where it is established (as set out in Annex IXB of Directive 2004/18/EC)
YesNoN/A
Y
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under the conditions laid down by that Member.
2.2.11 If the answer to any of these is “NO” please give brief details opposite, including what has been done to put things right.
N
3 FINANCIAL INFORMATION
Question No.
Question Response Mandatory (Y/N)
3.1 Please provide at least one of the following as set out in 3.1.1-3.1.4. (These are listed in order of preference)
Attachment Y
3.1.1 A copy of your most recent audited accounts for the last two years of trading or for the period that is available if trading for less than two years. (if this is not possible please provide one of the below)
YesNo
N
3.1.2 A statement of accounts or extracts from those accounts relating to the business which are required to be published by law or where an audited form cannot be provided as required in 3.1.1. This should include a statement of turnover, Profit & Loss and cash flow position for the most recent full year of trading and an end period balance sheet (if this is not possible please provide the below)
YesNo
N
3.1.3 A statement covering the 2 previous financial years of trading (or for the period the organisation has been trading) of the economic operator, of—
(a) the overall turnover of the business of the economic operator; and
(b) where appropriate, the turnover in respect of the work, works, goods or services which are of a similar type to the subject matter of this contract. (if this is not possible please provide the below)
YesNo
N
3.1.4 A statement of your cash flow forecast for the current year and a bank letter outlining the current cash and credit position.
YesNo
N
3.2 If asked would you be able to obtain a guarantee?
YesNo
Y
3.2.1 If you could obtain a guarantee, please state from whom.
N
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3.3 Has your organisation met the terms of its banking facilities and loan agreements (if any) during the past year?
YesNo
Y
3.3.1 If “No” what were the reasons, and what has been done to put things right?
N
3.4 Has your organisation met all its obligations to pay its creditors and staff during the past year?
YesNo
Y
3.4.1 If “No” please explain why not: N3.5 Please confirm that you have supplied
documents relevant to the financial information requested in 3.1.1, 3.1.2 and 3.1.3.
YesNo
Y
4 INSURANCE
Question No.
Question Response Mandatory (Y/N)
4.1 Does your Organisation carry current insurance cover for Employer’s Liability:
YesNo
Y
4.1.1 Please insert the value of the cover. N4.2 Does your Organisation carry current
insurance cover for Public Liability:YesNo
Y
4.2.1 Please insert the value of the cover. N4.3 Does your Organisation carry current
insurance cover for Professional Indemnity:
YesNo
Y
4.3.1 Please insert the value of the cover. NNote: Where a tender is successful North East Finance may request that the Organisation purchases professional indemnity insurance (amount to be agreed) if such insurance is not already held.
4.4 Please provide copies of your current insurance certificates.
Attachment Y
5 QUALITY ASSURANCE
Question No.
Question Response Mandatory (Y/N)
5.1 Does your organisation have a quality management/assurance system? Please tick the most appropriate.
BS/EN/ISO Certificate European QA equivalent to
BSO/ISO/EN Own QA system No system in place
Y
5.2 If you do not have quality certification or a quality assurance/management system, please explain why?
N
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6 HEALTH AND SAFETY
Question No.
Question Response Mandatory (Y/N)
6.1 If you have more than 5 members of staff and/or are required by law, does your organisation have a written health and safety at work policy? If 'No' please answer 6.2.
YesNo
Y
If you have less than 5 members of staff and are not required by law to have a written health and safety at work policy please complete section 6.2.
6.1.1 Is this reviewed periodically? YesNo
N
6.1.2 Is there a signed current copy? YesNo
N
6.1.3 Does it define Health and Safety responsibilities for all staff?
YesNo
N
6.1.4 Does it define Health and Safety responsibilities according to role?
YesNo
N
6.1.5 If you answered YES to 6.1 please provide a copy of the organisations H&S policy and/or other declaration, information or instruction issued by your organisation to protect the health and safety of staff at work.
Attachment N
6.2 Does your organisation have a health and safety at work system/procedure?
YesNo
Y
6.3 If you answered “No”, to either 6.1 or 6.2 above please explain why:
N
6.4 Does your organisation train staff in Health and Safety?
YesNo
Y
6.5 Does your organisation provide Accident reporting training?
YesNo
Y
6.6 Where required does your organisation make sure it complies with the Health & Safety at Work Act 1974 or European equivalent legislation?
YesNo
Y
6.6.1 Does your organisation take steps to identify which of the regulations under the Act apply to your business?
YesNo
Y
6.6.2 Does your organisation have processes and procedures to ensure that these regulations are followed?
YesNo
Y
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7 EQUALITY & DIVERSITY
Question No.
Question Response Mandatory (Y/N)
7.1 Does your organisation have a written Equality & Diversity policy, to avoid discrimination? If 'No' please move to 7.2.
YesNo
Y
7.1.1 Is your policy written to comply with the Disability Discrimination Act 1995 or European equivalent legislation?
YesNo
N
7.1.2 Is your policy written to comply with The Employment Equality (Religion or Belief) Regulations 2003 and The Employment Equality (Sexual Orientation) Regulations 2003 or European equivalent legislation?
YesNo
N
7.1.3 Is your policy written to comply with the Race Relations Act 1976 as amended by Race Relations (Amendment) Act 2000 or European equivalent legislation, and is it your practice not to treat one group of people less favourably than others because of their race, nationality, or ethnic origin in relation to decisions to recruit, train or promote employees?
YesNo
N
7.1.4 Please provide a copy of the organisations Equality & Diversity policy.
Attachment Y
7.2 If you answered “No” to 7.1 above please explain why:
N
7.3 This question should only be answered by Public Bodies only.
7.3.1 Does your Organisation comply with the 'Public Duties' in relation to race, gender and disability?
YesNo
N
7.3.2 If you answered “No” to 7.3.1 above please explain why:
N
8 ENVIRONMENTAL MANAGEMENT
Question No.
Question Response Mandatory (Y/N)
8.1 Does your organisation have an environmental policy or an environmental management system*?
YesNo
Y
* “system” means processes and procedures to ensure that the subject is properly managed. This includes making sure that legal requirements are met.
8.2 Please provide a copy of the organisations Environmental Policy.
Attachment Y
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Appendix 4
Eligibility Criteria
Several factors have to be taken into account to determine whether an individual or organisation is eligible to receive a loan from the FBNE Microloan Fund. These are set out in detail in the Fund Management Agreement but for ease of reference this schedule gives a summary of the main eligibility criteria.
The Successful Fund Manager will be responsible for ensuring that all borrowers satisfy the eligibility criteria and will have to retain evidence which provides verification of the eligibility of each borrower.
1. The Business Must Be Located in the North East of England
All applicants must be located in the North East of England, being: Northumberland, Tyne and Wear, Durham and Tees Valley.
In relation to companies or other organisations, this means that they must have their principal place of business or a material part of their operations, people or trading in the North East. Where there is any ambiguity as to whether this requirement is satisfied, the fund manager must seek and comply with guidance from NEF.
In relation to individuals who operate a business as a sole trader, they must be resident in, and operate their business in, the North East. Individuals who are not resident in the North East can receive a loan from the Fund only if the manager demonstrates to the satisfaction of the NEF that the individual’s principal place of business and the majority of trading activities are within the North East. Where there is any ambiguity as to whether this requirement is satisfied, the manager must seek and comply with guidance from NEF.
2. The Business Must be Viable but Unable to Raise Funds Elsewhere
All borrowers must have a viable business proposition which requires (or will benefit from) loan finance. To be eligible for a loan from the fund, the borrower must be able to demonstrate that they have been unable to raise finance to the amount of the loan (or the full amount of funding which they require) from a commercial / mainstream source. This may be because they lack a trading history or collateral or because lenders consider them to be too high risk due to their circumstances or characteristics. However, this is without prejudice to the ability of the borrower to secure leverage.
The fund cannot lend to any business which is deemed to be an ‘undertaking in difficulty’ under the EU state aid regulations. In essence, this means that any business or individual which has formally begun (or is subject to) any insolvency, winding up, bankruptcy or sequestration procedures (whether voluntarily or due to court action by creditors) cannot receive a loan from the Fund.
Also, the fund cannot lend to any business or individual which is in arrears to HMRC in or any other public bodies. This precludes investment where the business is in default, either under the original payment terms or under an agreed repayment plan. If the business was in default and built up arrears but has agreed a revised payment plan and is up to date with the revised plan, it can receive investment. The fund manager will be expected to ensure that the loan will be used to fund new business activities and not to refinance or repackage existing arrangements.
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3. The Business Must Not Operate in Any of the Excluded Sectors
Schedule 7 to the Fund Management Agreement lists a number of sectors and activities which are not eligible for investment from the Fund – and the MFM must ensure that these are strictly applied. They include the following: retailing; pure real estate development activity; gambling and related equipment; the primary production, processing or marketing of products in the fisheries, aquaculture and agricultural sectors.
4. The Borrower Must be an Individual or an SME
The Fund has been created to lend to individuals and to organisations which meet the EU definition of SME – but is intended to lend principally to individuals and micro to small sized businesses. SMEs are defined as any entity engaged in an economic activity irrespective of legal form (including the self employed and social enterprises) which employs fewer than 250 people and an annual turnover not exceeding €50m and/or a balance sheet total not exceeding €43m.
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Appendix 5
Form of Tender
To: North East Finance (Subco) LimitedGround Floor1 St James’ GateNewcastle upon TyneNE1 4AD
For the Attention of: Alastair Smith We the undersigned, hereby tender and offer to provide the contract as listed below as more particularly referred to in the Invitation to Tender and Tender Specification Document supplied to us for the purpose of tendering for the provision of the contract and upon the terms thereof.We confirm that if we are successful we will provide the services in accordance with the contract which consists of: (i) the Fund Management Agreement; (ii) the Funding Agreement; (iii) the Tender Proposal Document and any other information supplied in our tender or
subsequently agreed in accordance with the Fund Management Agreement to be incorporated in the Fund Business Plan.
The contract will be created by North East Finance (Subco) Limited (NEF) when (by executing the Fund Management Agreement) it notifies us of the acceptance of our offer as constituted by our tender submissions in relation to the contract.
We undertake in the event of acceptance of our offer: (i) to supply the Services to the exact requirements of NEF in accordance with the
contract; (ii) to execute the Fund Management Agreement within 14 days of such acceptance and
if required in the interim supply the Services in accordance with the Fund Management Agreement; and
(iii) that this offer is made in good faith and that we have not fixed or adjusted the amount of the offer by agreement, or in accordance with any agreement or arrangement, with any other person.
We hereby certify that we have not (and that no organisation associated with us has) and we hereby undertake that we will not:
(i) communicate to any person other than the person inviting these offers the amount or approximate amount of the offer, except where the disclosure, in confidence, of the approximate amount of the offer was necessary to obtain quotations required for the preparation of the offer, for insurance purposes or for a contract guarantee bond;
(ii) enter into any arrangement or agreement with any other person that he or the other
person(s) shall refrain from making an offer or as to the amount of any offer to be submitted;
(iii) canvass any member, Director, employee or adviser of NEFL in connection with the proposed award of the contract by NEFL and that no person employed by us or acting on our behalf, or advising us, has done any such act.
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We agree that NEF may, in consideration of our offer, and in any subsequent actions, rely upon the statements made in this Form of Tender.
We confirm that the prices in our offer will remain firm for 90 days.
We understand that NEF (1) may award the contract to more than one fund manager and (2) reserves the right to accept or refuse this offer, or any part of this offer, whether it is lower, the same, or higher than any other offer. We understand that any decision of NEF to award the contract to us may be subject to the European Investment Bank being satisfied with the outcome of a due diligence assessment on us. We hereby agree to participate in such due diligence exercise and to promptly supply such information as is reasonably requested as part of the due diligence exercise.
We confirm that the information supplied to you and forming part of this offer was true when made and remains true and accurate in all respects. We confirm and undertake that if any of such information becomes untrue or misleading that we shall notify you immediately and update such information as required.
Signed by
Name……………………………………… Position……………………………………………..
and
Name……………………………………… Position …………………………………………….
for and on behalf of [FUND MANAGER]
in the presence of:-
Witness signature …………………………………
Full Name of Witness …………………………………
Address
Date:
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