The Right Supplier for the Right Contract in Public Procurement
- Public Sector
- Supplier Management
On 1 January 2021 the United Kingdom of Great Britain and Northern Ireland exited the transition period and Brexit became not just a formality but a reality. In terms of public procurement, the main initial impact of this development, affecting all four constituent nations in the UK, is the launch of the new Find a Tender Service, replacing the Official Journal of the European Union’s Tenders Electronic Daily in the UK as the official platform for publishing contract notices for new procurements. The Find a Tender Service will be free to access for both UK and overseas suppliers, and the UK remains committed to the WTO Agreement on Government Procurement, which has 48 participants, including the European Union itself and its 27 members.
These changes aside, everything is very much yet to be decided. In December 2020, the UK Cabinet Office published a Green Paper entitled “Transforming public procurement.” A green paper is a consultation document and contributions closed on 10 March.
The UK spends some £290 billion on public procurement every year and that figure will undoubtedly have gone up significantly in 2020 given the contingencies caused by Covid-19, which also exposed some major weaknesses of the public procurement system. As the Green Paper acknowledges, “Across the public sector, commercial teams had to procure contracts with extreme urgency to secure the vital supplies required to protect frontline NHS workers, maintain public services and support our communities.”
So what is likely to change? The broad aims are laudable:
to speed up and simplify our procurement processes, place value for money at their heart, and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery.
Curiously, the word “sourcing” does not appear once in the 84-page document, although sourcing best practices will be absolutely necessary to achieving the aim to “unleash opportunities” for a broader and more diverse supplier base.
The Green Paper has eight chapters. Chapter 4 sets out the aim to allow contracting authorities more flexibility to secure best outcomes by requiring evaluation of bids on the basis of the “Most Advantageous Tender” (MAT) rather the “Most Economically Advantageous” (MEAT). Chapter 1 of the document aims to align procurement closer to the UK’s needs. These are not set out – that would be beyond the scope of this Green Paper – but in essence reforms would require contracting authorities to have regard to a new National Procurement Policy Statement, and the Government is seeking to establish a new unit within the Cabinet Office supported by an independent panel of experts.
There are no proposals to incorporate other “stand-alone” legislation such as The Public Services (Social Value) Act 2012, which we discussed in a white paper last year. However, the Green Paper states, “We want to send a clear message that public sector commercial teams do not have to select the lowest price bid, and that in setting the procurement strategy, drafting the contract terms and evaluating tenders they can and should take a broad view of value for money that includes social value.”
To achieve the objective of finding the right supplier for the right contract, based on MAT, i.e. giving greater emphasis to non-economic as well as economic factors, the upcoming technology and process improvements must be put in place:
- More robust data systems to provide greater visibility and intelligence into global supplier networks for public sector sourcing and category managers. In order to make the right decisions on suppliers that are not simply based on lowest bid, public authorities need objective, reliable and current sources of information.
- Implementing a new Dynamic Purchasing System (DPS) for all types of procurement (this is dealt with in Chapter 5 of the Green Paper). Unlike a traditional framework, with a DPS suppliers can apply to join at any time. In other words, it is an “open market” solution designed to provide buyers with access to a pool of pre-qualified suppliers.
- Digital transformation of sourcing needs to become more ambitious and go much further. Sourcing optimization tools that are accessible and transparent, enabling smaller as well as market-leading suppliers to participate in bidding events for complex categories of spend based on multiple factors and considerations. Finding the lowest-cost solution is easy, you can do it with a spreadsheet. But when there are many more factors that need to be considered and you are opening up a tender to perhaps hundreds of bidders, authorities will need to apply the kind of optimization software that has been successfully deployed in many private sector enterprises serving government agencies.