What’s the Key to Picking the Most Appropriate Procurement Route?
ASE supports a variety of organisations to develop and deliver their procurement strategies, particularly within the UK public sector. One question we are regularly asked by our public sector clients is:
Which procurement route should we use…?
There are broadly four different procurement routes used within the public sector:
- the Open Procedure;
- the Restricted Procedure;
- Competitive Dialogue, and
- the Negotiated Procedure.
Each has its merits and drawbacks, plus there are a number of prescribed requirements set-out within the Regulations. However, before we consider any procurement route we need to establish whether the project actually falls under the regulations. Did you know that new EU financial thresholds came into being on 1st January 2014? These can be found here. If the contract value exceeds or is likely to exceed these thresholds (including any optional or extendable elements) then the regulations must be followed and you must use one of these procurement routes. In addition, clients should review any other available options for procuring the services they require. Examples could include making use of pre-existing contractual arrangements from existing suppliers, or using one of the many framework arrangements available to the client.
So which procurement route to use…?
So, once it is established that a procurement run under the regulations is required – the client needs to decide which route to take.
At ASE, we have developed a simple decision-making tool to aide clients to decide upon the most appropriate procurement route. This is by no means perfect, but it does provide a simple approach to assist in the decision-making.
So, looking at the decision-making tool, what are some of the key decisions to help select the most appropriate procurement route:
Are the Requirements for the services fully defined and specified? i.e. does the client know precisely what it is that they want to buy, and when it is needed?
If not, then the client should either spend more time developing its requirements itself (and then use the Open or Restricted Procedure) or develop the requirements with input from potential suppliers by commencing the procurement using either the Negotiated Procedure or Competitive Dialogue.
Are the commercial principles and/or the contractual arrangements defined? i.e. has the client established the mechanism under which the services will be provided, and within the principles, has it also set-out how it intends to balance the Risk & Reward within the commercial arrangements?
Areas that should be developed include, for example:
- Charging / Payment mechanism(s);
- Certainty & transparency of costs;
- Performance management (service levels and incentive / penalty arrangements);
- Governance arrangements; and
- Protection of Intellectual Property; etc.
Again, where these are not developed, the client should spend more time developing these itself (and then use the Open or Restricted Procedure) or utilise the Negotiated or Competitive Dialogue Procedure and then work with the selected suppliers to develop these.
Do any elements of the services / contract require some form of Negotiation (as opposed to discussion and/or dialogue)?
This is where clients need to choose between the Negotiated Procedure or Competitive Dialogue. This choice requires great care as the Negotiated Procedure, as shown in the “Risks of each Procurement Route” Table below, poses additional risks, namely: specific rules must be followed; and it can take extended periods to reach consensus.
Should the number of suppliers invited to tender be restricted?
This question is more relevant when clients have established their requirements and set-out clearly the commercial principles (i.e. they are not using the Negotiated Procedure or Competitive Dialogue, where each has selection as part of the process). Therefore, this leads to a choice between the Open Procedure or the Restricted Procedure. The use of the Open Procedure does not allow for a qualification or selection stage (and all bidders’ tenders must be evaluated), whereas the Restricted Procedure does allow for an initial selection of suppliers, enabling the tender stage to be run with a more manageable number of suppliers. Conversely, the use of the Open Procedure necessitates that the Selection Criteria, the Contract and associated Schedules and the Award Criteria are all developed prior to the start of the formal procurement. The “Pre-Requisite for each Procurement Route, in order to Commence OJEU” table below lists the minimum requirements that must be in place for each procurement type.
The benefits of each procurement type are also set out in the Table below, “Benefits of each Procurement Route”.
Public Sector procurement is a far more complex activity than merely following a simple decision tree to arrive at the most appropriate procurement route. Yes, the decision-tree can be used to reach a basic understanding, but our experience tells us that no two procurements are the same and each should be assessed based on its specific requirements and circumstances.
At ASE Consulting we help organisations make sense of the public sector procurement regulations, help clients develop and deliver procurement strategies, and minimise the risks of complex procurement activities. To request more information please tell us about your project here.