Dynamic Purchasing Systems: An Answer to Public Procurement Burdens?
Every year, more than 250,000 public authorities in the European Union spend around 14% of GDP (around €2 trillion per year) on the purchase of services, works and supplies. Their peers in the United States are also responsible for about $2 trillion in spend. Could the money be better spent? Absolutely. How? Now that’s a much more difficult question. On the one hand, public sector procurement needs to comply with a variety of local, national and federal rules. On the other, the needs of the business require continuous research into effectiveness and efficiency. Meanwhile, civil servants are subjected to the constant scrutiny of the public and politicians, while at the same time being exposed to the competitive forces of the marketplace not only nationally but also internationally.
“Virtually all procurement professionals have been under pressure to “do more with less,” the demand is particularly intense in public procurement.”
Money has been tight more or less everywhere since the financial crash of 2008 heralded a new age of austerity. Some departments have seen cuts in spending year on year. Virtually all procurement professionals have been under pressure to “do more with less,” the demand is particularly intense in public procurement. It is increasingly widely recognized that the challenge cannot be met without significant investment in technology. Technology and commercial systems provide procurement organizations with the ability not only to improve the outcomes but also to provide the right level of competitive tension through the process to drive out the best value. But the technology must not only drive cost savings but also reduced risk, greater security and more robust processes. Above all, it has to be easy to use if civil servants are to be brought on board in adopting the technology.
One of the approaches that is gaining wide acceptance, and which is specific to the public sector, is the implementation of dynamic purchasing systems (DPS).
What is a Dynamic Purchasing System?
A DPS is a completely electronic system used by a contracting authority (the buyer) to purchase commonly used goods or services. Unlike a traditional framework, 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. A DPS is usually set up by central purchasing bodies and made available for use by the public sector. It can be divided into categories of works, services or goods (lots), and these may include the size of a contract or the geographical area of contract delivery. Suppliers can apply to single or multiple lots within a DPS.
The Advantages of a DPS
The advantage for buyers is that this is faster and less onerous than the usual tender process. In the case of European Union authorities, this is because the OJEU (Office Journal of the European Union) and PQQ (pre-qualification questionnaire) stages have already been taken care of, and buyers can be sure that they are adhering to EU procurement legislation. Once the DPS has been set up, authorities can award local contracts. By using the DPS there is no need for an authority to advertise its requirement separately.
Nevertheless, there is flexibility. The DPS is based on generic service specifications, which authorities can adapt to meet their specific requirements. Award criteria can be formulated more precisely for local contracts. Such an approach encourages competition because it is easier for local providers to get onto the DPS and join at any time during its period of validity.
Buyers can undertake a further competition with all pre-qualified bidders; all qualification documentation is held by the central purchasing body.
“there are benefits to suppliers too.”
But there are benefits to suppliers too. They do not have to demonstrate suitability and capability every time they wish to compete for a public sector contract. This also means it is easier for SMEs, which have fewer administrative resources, to compete for business. A DPS remains open to new suppliers throughout the period of the agreement, which means suppliers that cannot meet the selection criteria at the time a DPS is first established, or which fail in their first application, may have the opportunity to review their processes and apply for acceptance at a later stage. Furthermore, the award of individual tenders is typically quicker than under some other procedures.
DPSs are still at a relatively early stage of development but is gaining adoption, for example in the British National Health Service and in some central government departments. Jim Rawlings, Director of Procurement at the UK Ministry of Justice, says: “We are quite excited to be expanding our use of dynamic purchasing systems in addition to more traditional content management at a catalogue level that streamlines the process, provides not only self-service but also local autonomy whilst giving us compliant spend and significantly better management information, which can only drive better efficiency and values through that use of that contract going forward.”