As a busy public sector budget holder or Procurement Manager having an efficient system for assessing a specific procurement route, along with the justification why, is essential. This process has the potential to significantly impact the efficiency and success of your procurement strategy.
With the primary aim of this article being to guide public sector buyers through the procurement options available to them, we'll delve into the strengths and weaknesses of each option, ensuring that you're equipped with the knowledge to make informed decisions.
The Importance of Procurement in Public Sector
In the grand scheme of public sector operations, procurement plays a pivotal role. It is the process of acquiring goods, services and works, covering both acquisition from third parties and in-house providers. Procurement spans the whole lifecycle from identifying needs, through to the end of a service contract or the end of the useful life of an asset. It involves vital decisions on how to use your precious procurement resource to ensure it maximises outcomes and performance.
Procurement in the public sector is not merely a process, but a cornerstone of public service. As the demand for public services increases, the resources available are often drastically reducing. This intensifies the pressure to find greater efficiencies and improve productivity, driving councils, housing associations and Central Government, for example, to explore different ways to deliver better outcomes for local communities.
This is where an effective procurement options appraisal comes into play, as it can significantly contribute to socio-economic agendas. These include a successful local economy, a thriving voluntary sector, community empowerment, environmental and ethical issues, and value for money.
Understanding Procurement Options Appraisal
Procurement options appraisal is the process of defining objectives, examining options and weighing up the costs, benefits, risks and uncertainties before a decision is made. It enables you to objectively and systematically evaluate the best way to achieve your desired outcomes or optimal solution.
This is achieved by exploring the relative costs and benefits of a particular option and then comparing this fairly to how other options perform against the same set of evaluation criteria.
Options in Public Procurement
When navigating the procurement landscape, several options are available, each with its unique strengths and weaknesses. These options provide different routes to achieve value for money, compliance with regulations and procurement goals. They include open procedures, where any supplier may bid on an advertised opportunity, framework agreements, dynamic purchasing systems (DPS), and individual contracts.
One free and efficient route to fully understand what frameworks or DPSs are available is to use our Tender Pipeline software.
You can search, for example, on ‘grounds maintenance services’, ‘frameworks’ and ‘UK’ and quickly see what existing frameworks are available. There is also a useful ‘DPS’ tab which allows you to search for only DPS agreements.
As part of your options appraisal you will first need to understand the market. A PIN notice can help your soft market testing and is a great chance to speak to suppliers.
You can also monitor the procurement category and who has won contracts locally to you in order to understand the key players in the market. Using Tender Pipeline, via the ‘Awarded’ tab, you can search for example – ‘grounds maintenance’, ‘Midlands’ and see who is winning those tenders:
Framework Agreements
Framework agreements provide a mechanism for spot purchasing over a set period, typically up to a maximum of four years. They offer clarity and consistency for the market, service users and commissioners. Under this agreement, a council or buyer accepts a number of suppliers as competitors to deliver the services.
We fully explain framework agreements in our dedicated article.
Strengths of Framework Agreements
Improve clarity and consistency for market, service users and commissioners.
Enable a less resource-intensive and more person-centred approach to negotiating individual placement contracts.
Increase the range and quality of provisions.
Allow for setting maximum or benchmarked prices for different services.
Weaknesses of Framework Agreements
Restrict the ability to bring in new providers during the term of the agreement.
May lead to a lack of ongoing competition to drive quality, performance and innovation once the agreement is in place.
No obligation for providers to pick up packages, which could leave some areas without providers bidding for work.
Dynamic Purchasing Systems (DPS)
A Dynamic Purchasing System (DPS) is a route to compliantly set up and maintain a list of providers to purchase from as and when required. Unlike framework agreements, suppliers can apply to join the DPS at any point during its lifetime.
Strengths of Dynamic Purchasing Systems
Allow for new providers to join the DPS at any time, subject to meeting the quality requirements.
Encourage new entrants to enter the market and increase competition.
Can be set for a longer period than standard four-year frameworks and can include extension options.
Weaknesses of Dynamic Purchasing Systems
Variance in prices at call-off stage unless tight parameters are put in place or a fixed rate is set.
No obligation for providers to pick up packages, which could leave some areas without providers bidding for work.
Require more resources to manage due to potentially more providers to oversee.
Individual Contracts
Instead of setting up a framework or DPS, procurement can be done via individual contracts. This approach can enable very individualised, bespoke services for service users with complex needs.
Strengths of Individual Contracts
Enable very individualised, bespoke services for service users with complex needs.
Save an upfront tender process.
Weaknesses of Individual Contracts
Can be very resource-intensive for the Council and providers in terms of procuring individual spot placements and tendering large block contracts.
Lack a clear, consistent framework and expectations for services.
Result in a lack of clarity about the provision available in the county.
Hybrid Model - Dynamic Purchasing Vehicle (DPV)
The DPV is a hybrid between a framework agreement and a DPS. It incorporates all the strengths from both a Framework Agreement and a DPS, with suppliers being able to apply to join the DPV at specified points throughout its period of validity. This reduces the resource required to undertake a conventional DPS process.
The Role of Legislation in Public Procurement
Public procurement is governed by legislation, and it is crucial for public sector organisations to ensure procurement compliance. This involves following the Public Contracts Regulations 2015 (PCR 2015) procurement process, which ensures that all procurement activities are carried out in a lawful, fair and transparent manner.
With current procurement reforms, you can monitor updates via our blog, such as the impact of the upcoming Procurement Bill.
Procurement Challenges and Solutions
There are several major challenges in public procurement, such as spending cuts, demonstrating the value proposition of procurement, managing capacity and capability, and achieving net-zero energy. By understanding these challenges and the potential solutions, public sector buyers or budget holders can make informed decisions and optimise their procurement strategies.
In conclusion, procuring effectively in the public sector is a complex task that requires a deep understanding of the various options available, their strengths and weaknesses, and the legal requirements. By undertaking a thorough procurement options appraisal, you will be better equipped to make the right decisions that deliver value for money, compliance with regulations, and ultimately, better public services.
To discuss your options and how we can help – contact us now on hello@thorntonandlowe.com
