Back Office Parking Management System

Bidders will be assessed against the City’s appraisal of their economic and financial standing. The City’s decision in this respect is final. Bidders are advised to use the clarification period to raise any questions about failing this appraisal. The appraisal consists of three parts as described below:

PART A:  Bidders are required to satisfy minimum standards with regards to their revenue requirement, standard accounting ratios and Altman’s Zone of Discrimination Score achieved. Details of these standards and their calculation are set out below.

PART B:  The Bidder’s accounts will be examined following the process described below to determine whether there is material evidence to show that they do not have the economic and financial standing to perform the contact.

PART C:  Bidders with accounts that display any of the factors listed in Part C - Section One below will automatically result in a failed appraisal. Bidders with accounts that display any of the factors listed in Part C - Section One below will be failed unless there are strong mitigating circumstances.

BIDDERS MUST PASS ALL THREE PARTS OF THE APPRAISAL PROCESS.

PART A:

Revenue Ratio

Minimum Revenue Requirement:

The revenue requirement is calculated as the annual average revenue of the last two reported financial years, divided by the estimated annual contract value, £71,429. Bidders will be required to have an unrounded result of ‘2.0’ or greater. A financial year is taken to be of 12 months’ duration; where this is not the case a pro rata calculation will be used to establish the 12 months’ equivalent.

Standard Accounting Ratios

Bidders will be required to meet minimum standards with regards to the following accounting ratios calculated from their last reported set of financial accounts.

Current Ratio: being total current assets divided by total current liabilities. Bidders will be required to have an unrounded result of ‘1.00’ or greater.

Quick Ratio: being total current assets excluding stock and work in progress divided by total current liabilities. Bidders will be required to have an unrounded result of ‘1.00’ or greater.

Altman’s Z Score

A definition and explanation of Altman’s Z score and its calculation can be found on:  en.wikipedia.org/wiki/Altman_Z-score ↗

Bidders are required to achieve an Altman’s Zones of Discrimination score of ‘1.80’ or greater calculated as follows from the latest reported set of financial accounts:

The sum of [Net Current assets* divided by Total Assets] multiplied by 1.2; plus

The sum of [Retained Earnings divided by Total Assets] multiplied by 1.4; plus

The sum of [Profits before interest and tax divided by Total Assets] multiplied by 3.3; plus

The sum of [Net Equity reported on the balance sheet divided by Total Liabilities] multiplied by 0.6; plus

The sum of [Revenue** divided by Total Assets] multiplied by 1.0.

The sum of factors (a)-(e) above is compared to Altman’s Zones of discrimination to reach a numerical score.

*Formerly “working capital”

**Formerly “turnover”

Please note that the City’s financial appraisals use “Net Equity reported on the balance sheet” in place of “market capitalisation” for the purposes of this calculation.

PART B:

Assessment of financial statements for evidence of economic and financial standing

In addition to the requirements set out in Part A above, the City will critically examine the following items in the accounts to determine whether the bidder has the economic and financial standing to perform the contract:

Revenue

Profitability

Net Current Assets/Liabilities (‘Working Capital’)

Net Worth

Cash Flow

Funding

Intercompany Trading

Company Ownership

Directors Appointments

Auditors Report

The director’s report

Indices calculated on revenue, retained profit and ‘working capital’ over three years.

Notes to the accounts

Where the bidder is a charity, the following items will also be considered:

The proportion of restricted funds received and held;

The level of general reserves;

The level of unrestricted incoming resources;

The reserves policy, and whether or not this has actually been achieved;

In relation to the items above, the City will examine year to year changes, the accuracy of the data, any unexplained large movements, any changes in ownership, unexplained restating of prior year comparative figures and any relevant narrative to establish whether the Bidder has the economic and financial standing to perform the contract.

The Bidder will be failed if in making the assessment above, there is material evidence to show that the Bidder lacks the economic and financial standing to perform the contract.

PART C:

Section One

Factors which will lead to a failed appraisal of the bidder’s economic and financial standing

The following factors will result in a failed appraisal of the bidder’s economic and financial standing:

A qualified audit report on the latest set of accounts;

Loss making entities with negative working capital and negative net worth

Entities in administration;

A refusal to provide 2 years’ full signed accounts where it is known that such information exists (Guarantee invalid*);

Signed accounts which are numerically inaccurate, incomplete or which contradict other versions of the same accounts (Guarantee invalid*);

Accounts with pages inserted belonging to other entities (Guarantee invalid*);

*A fail for this item cannot be mitigated by a guarantee.

Section Two

Factors which will lead to a failed appraisal of the bidder’s economic and financial standing unless there are strong mitigating circumstances

Bidders with accounts displaying any of the factors listed below will result in a failed appraisal of their economic and financial standing unless there are strong mitigating circumstances shown in the accounts, or other financial documents that the bidder is able to provide to the satisfaction of the Chamberlain:

Accounts overdue for filing by more than one month (Guarantee invalid*);

Accounts disclosing a loss with negative working capital and whose net worth is negative if intangible assets are discounted.

Three or more late filings out of the last five of documentation required by Companies House e.g. the annual return or accounts (Guarantee invalid*);

Registrar’s Motions to Strike Off from the register of Companies (Guarantee invalid*);

Entities operating under a Corporate Voluntary Arrangement or other such agreement with creditors;

An Emphasis of Matter raised by the Auditor e.g. on the validity or otherwise of a going concern statement;

Failure to disclose a conflict of interest revealed by examination of the accounts (Guarantee invalid*).

*A fail for this item cannot be mitigated by a guarantee.

The suppliers are required to meet a number of conditions of participation relating to their legal and financial capacity to perform the contract, as well as their technical ability.