Transforming public procurement: What does it mean?
As of 1 Jan 2021, the United Kingdom will no longer be part of the EU. Due to other pressing news, it hasn’t got the attention it deserves. This is a major change for how the UK operates and interacts with its closest business partners, from going on holiday to buying goods and services. As a procurement professional (geek if I’m honest), I get excited by anything to do with procurement, and there are some potential changes afoot!
Overhauling procurement rules
On 15 December, the government published a green paper called Transforming public procurement. This outlines the new plans to transform procurement to provide more value for money and to benefit small businesses. The intention is to overhaul the current procurement rules including:
- Public Contract Regulations 2015
- Utilities Contract Regulations 2016
- Concession Contract Regulations 2016
- Defence and Security public Contract Regulations 2011
The government want to bring all of these into a single piece of legislation to make the rules clearer.
Current problems with procurement and how they could improve
Currently, big suppliers regularly have issues because of mismanagement or overspending. This is in the news almost daily. However, subject matter experts (SMEs) are not called out specifically in these proposals which is a real shame. I feel the proposals are much more about improving procurement from a buyer’s side rather than for the supplier.
The government is certainly taking this seriously and is looking to revolutionise public procurement, making it simpler, easier, and more efficient for both contracting authorities and suppliers. They propose overhauling the complex and inflexible procurement procedures and replacing them with three simple, modern procedures:
- a new flexible procedure that gives buyers the freedom to negotiate and innovate to get the best from the private, charity and social enterprise sectors.
- an open procedure that buyers can use for simpler, ‘off the shelf’ competitions.
- a limited tendering procedure that buyers can use in certain circumstances, such as in crisis or extreme urgency.
While these changes are positive, there are still improvements that could be made.
1. Exclusion Rules
The paper proposes “using the exclusion rules to tackle unacceptable behaviour in public procurement such as fraud and exploring the introduction of a centrally managed debarment list.”
When I used to sit on the other side of the procurement fence, I would be all for this, believing this is an effective way of ensuring suppliers who repeatedly underperformed or committed fraud would be excluded from future procurements. This, of course, would need to be properly documented. The supplier would also need to be able to provide the reason for failures and be able to remove themselves from the list.
I would suggest this should be used sparingly, and with proper justification before a supplier is placed on the list. It’s all about evidence. Not managing this process properly could lead to legal action further down the line.
The principles behind current public procurement are the spirit of being open, fair, and transparent. The government is proposing to sign up to the World Trade Organisation (WTO) Agreement on Government Procurement which has the spirit of “openness, transparency, and non-discrimination. “
We all want the government to be open, and we all want to ensure our money is being spent responsibly, and these intentions can only help that. The paper also proposes the following should be included in the new legislation:
- Public good
- Value for money
- Fair treatment of suppliers
These are principles we should adhere to, ones which I know procurement professionals adhere to too. This is, however, a difficult area to police. The government is proposing establishing a new unit to oversee public procurement with the power to review and intervene to “improve the commercial capability of contracting authorities.” This is a great idea. There are few checks on public procurement currently, especially outside of central government and arm’s length bodies, and this should be seen as a positive proposal. it will assist those contracting authorities such as local councils. There are presently no checks on the process, and this should be changed.
Currently, under the four main sets of regulations implementing the EU directives on public procurement there are a number of procedures which contracting authorities can follow, which are:
- Competitive dialogue
- Competitive with negotiation
- Negotiated procedure without prior publication
- Innovation partnerships
- Design contest
It’s clear what procedure to use for what a contracting authority needs to buy, and allows for authorities to be able to publish their preferred procedure when they start the process. However, the government is proposing to replace these with three procedures:
- Competitive Flexible Procedure
- Open Procedure
- Limited Tendering Procedure
The proposed procedures should make procurement easier and simpler.
The paper is proposing to address and better understand how procedural, cultural, and data challenges in public procurement can be overcome to better support innovation. 2020 has not only been the year of COVID, but has also been the year of Black Lives Matter, and ensuring that culture and underrepresented groups are represented in all parts of society. This is a great way to address this.
It wouldn’t be a fanfare of new procurement procedures if this old chestnut wasn’t rolled out. The Social Value Act is now 8 years old. It is nothing new, and it’s disappointing that it still needs special mention, like an old relative you’ve forgotten about.
Social Value should be baked into every procurement a contracting authority undertakes and they should be looking to work with all of their suppliers to improve the value of contracts to those it impacts.
I was the champion of this Act eight years ago when I worked for a Housing Association and was proud of the small strides we made there. I do not feel it is given enough emphasis on contracts, and this needs to change. My hope is this is pushed front and centre when it comes to proposed changes to the procurement process.
Value for money
This is called Most Economically Advantageous Tender (MEAT). MEAT should always be a combination of price and quality and should include the whole life cost of buying something, including:
Yet, it is perceived that MEAT means the lowest price. We all know what happens when we buy something cheap and don’t invest in it. It breaks. It goes wrong. It costs more than investing in something decent.
Therefore, the government is proposing replacing MEAT with MAT — Most Advantageous Tender. MAT intends to include a broader view of what value for money looks like, such as social value. This is an encouraging step.
Preferred Supplier List (PSL)
Preferred Supplier List, is a no-no. I don’t want one. I don’t want buyers to have them. They stifle competition. They restrict the market. But isn’t a Framework just a PSL with a fancy name? Yes and no.
A framework of suppliers that allow for direct award to a supplier can be justified as these suppliers have gone through a procurement process. They have shown their ability to deliver and jumped through the appropriate hoops. The government proposes to have multi-use lists of suppliers which the contracting authority has “determined satisfies the conditions for participation in that list, and that the procuring entity intends to use more than once.” This reduces costs and works to set up a contract, allowing for quick action in the case of urgent work.
Dynamic Purchasing Systems (DPS+)
I love anything with a plus in it. Apple TV+, Disney+, ESPN+. The last one less so not being a sports fan unless it’s baseball or cricket. But a plus gives you the feeling that you’re getting something better. Something shinier. Something which has that little bit extra which you don’t get without a plus.
The idea here is to allow for longer maximum terms of frameworks. How often have buyers and suppliers been frustrated with every two years re-applying for the same framework, to provide the same or similar service, with no consequential changes in the terms or service to be provided? It creates unnecessary work for all parties, with no real added value at the end of it, except we are all that little bit older.
The paper proposes having closed frameworks meaning that once the application process is complete, no further suppliers can join for four years. Plus, open frameworks, which means a supplier can join at any time. Both of these options reduce bureaucracy and cost, and an open framework allows suppliers to get a piece of the action at predetermined points outlined in the call for competition.
Hope for the future of procurement
The majority of these proposals make sense and allow for public procurement to be better by being easier. There are pros and cons of both. However, anything to make contracts simpler for the public sector should be applauded, and assistance for buyers to do it easier should be snapped up.
Whilst I do not believe the changes are going to rock the procurement world, I do hope it encourages procurement professionals to think about openness, transparency, non-discrimination, and ensuring the market is opened up a bit to encourage more diverse, small businesses to win contracts.
I would have liked to have seen more specific help for SMEs in this paper, but I hope that the proposed changes can assist contracting authorities further in working with SMEs and recognising the real benefit they can provide when delivering goods and services.
Written by David Pierce — Commercial & Procurement Lead, Difrent
Originally published at https://difrent.co.uk.