The rules that determine how the public sector buy are in the process of being reviewed, with some profound implications for buyers and sellers alike. Oxygen’s COO Clive Boddington and Head of Supplier Engagement, Libby Daniels review the proposals and share what they think they will mean for the future of public procurement.
Following on from the December 2020 Cabinet Office Green Paper, titled ‘Transforming Public Procurement’, which set out proposals for reforming UK public procurement legislation, a public consultation took place to gather feedback from over 500 stakeholders, including contracting authorities, suppliers, voluntary, community, and social enterprise organisations (VCSEs) and more.
Last week, the government response summary was published, providing further insight into the intentions of the reform and feedback from stakeholders that could influence legislation decisions, which are likely to come into force in late 2022/early 2023.
We identified three key themes that appear throughout the paper that we believe will significantly impact the landscape of public procurement and the procurement challenges in years to come:
A Shift in Procurement Focus and Desired Outcomes
The response to the green paper reveals strong support amongst stakeholders for a mindset shift in public procurement. The move from advocating that the contracting authority choose the ‘Most Economically Advantageous Tender’ to the ‘Most Advantageous Tender’ shows a clear recognition of the value that social value, innovation and better buyer-supplier partnerships can bring to public procurement. This is a significant step away from the cost and governance-driven public sector procurement processes of the past.
Two key objectives identified in the review are the need to drive increased innovation, and the diversification of the public sector supplier base. To help achieve those aims, there is a recognition of the need to increase the accessibility of public sector tenders to encourage small-and-medium-sized businesses (SMEs) to bid and win contract awards.
This is heavily supported in the Green Paper response, with many respondents showing support for a simplified selection stage through a supplier registration system, overhauling existing and complex procurement procedures, and more pre-procurement market engagement.
Not only should this streamline the procurement process through reducing administration and increasing clarity of specifications from the outset, but it should also massively improve the range of suppliers, including more SMEs, start-ups and VCSEs, as the tender process will be less cumbersome on all parties. That includes procurement teams, who should save much-needed time because of this streamlining and allow them to make better use of their existing resources.
This should drive additional cost out of the contract through early involvement and by being inherently less resource intensive. This was the subject of a lively debate at the recent CPO Advisory Forum where the conclusion of the group was that lowering barriers was not enough on its own, and authorities would need to do much more to support small businesses through training and support.
Further supporting the shift in focus for procurement teams is a drive for increased visibility of future pipelines, awards, and documentation. The Green Paper outlined requirements for contracting authorities to publish procurement pipelines up to 18 months in advance, developing a centralised register for frameworks and Dynamic Purchasing System (DPS) contracts, and mandating the publication of contract documents.
Nine-out-of-ten respondents were supportive of the additional visibility into future procurement, although almost half raised concerns regarding the amount of effort required to maintain and administrate such a proposal. Furthermore, a third noted that publication of contracts and bid documentation could have an anti-competitive and distortive impact on the market.
The publication of pipelines and framework registers could be a fantastic tool for existing suppliers to the public sector and to potential new entrants. By making opportunities even more visible, it allows suppliers who may not be able to reactively respond to a tender being issued to have the opportunity to bid. It also gives contracting authorities more control over resource planning and time management, moving away from a reactive procurement approach to one that is proactive and planned. This should particularly help organisations who are strained for time and resource, allowing them to plan and prioritise up to 18 months in advance.
Payment performance transparency and aggregation of public and private sector payment performance was also mentioned, with many supporting the alignment and for better visibility of supply chain performance. The respondents felt this would further support SMEs in bidding for work with the government, through reassurance of prompt payment and the knowledge that, even as a just a party in the supply chain, they would have the ability to escalate late payments. However, this is an additional administrative burden on contracting authorities to manage, as this data is often not readily available and would require cross-functional support from both contract management and finance functions.
Improved Systems & Information
Given that the increase in both time horizons and transparency will doubtlessly lead to more data to manage, the use of superior technology and digitising government procurement processes will be key to making the aims of this Green Paper possible.
Reporting tools will need to be used more effectively to manage procurement pipelines and payment performance reporting. This should reduce the administrative burden and make publication of these elements easier for contracting authorities.
There will also be the need for a digitised, centralised system to gather and store supplier registration information. This will require considerable cross-departmental co-ordination and support but will yield considerable benefits.
Finally, the response outlines the need for a digital, integrated procurement system that shares and provides insights into Government procurements and opportunities, fostering accessibility for suppliers and prospects for collaboration for contracting authorities.
Providing integrated, digitised data within an open, unified toolkit will give authorities the right information at point of need, enabling more informed and timely decisions.
Key Takeaways for Suppliers
- If adopted, rather than focusing procurement processes on driving down price, the proposed changes will move the focus of procurement decisions to the discovery of innovation in the market and encouraging a more diverse supply chain. This may favour more nimble, entrepreneurial organisations with novel approaches over large corporates where innovation is often slower or even stifled.
- It will no longer be good enough to make just things simpler or to merely encourage SMEs to bid. Smaller firms will have to be physically supported to improve their tendering capabilities. Contracting authorities will have to work out what that will mean for them, but early indications suggest that support will need to be provided to small businesses to overcome any capability and capacity gaps.
- The drive to simplify should mean that tenders will only include questions relevant to that contract, rather than use an over-engineered, single tender document with catch-all questions, regardless of the market or scope of the opportunity. This would allow suppliers to “sign up once” for public sector tenders with the basic information, rather than having to populate the same documentation on each occasion they choose to bid – particularly of benefit to smaller organisations who may not have teams dedicated to bid writing, saving them significant amounts of time, and allowing them to focus on the value they can add to specific opportunities.
- By revealing their 18-month procurement pipeline, contracting authorities are giving organisations more time to plan and prepare for upcoming tenders. However, the increased volume of forward-looking information available may mean that suppliers will need to look to better ways to collate and manage this information if they are to identify the local government tenders that will matter most to them in advance.
- Increased transparency around when payments are made should benefit both large and small suppliers and should reduce cashflow pressures. However, as larger firms tend to have better access to funding, this move should be particularly welcome to start-ups and SMEs.
Key Takeaways for Buyers
- The deprioritisation of price and re-evaluation of the importance of innovation, social value and more constructive supplier relationships appears to have been universally welcomed. The supplier registration system recommended in the Green Paper should help to enlarge the pool of bidders, but will require work, and crucially a fair amount of lead-time, to develop and co-ordinate across the range of expected end users.
- Opening the tendering process to more SMEs, start-ups and VCSEs should yield considerable benefits, but will require a more proactive response from contracting authorities. Procurement staff will need to be ready to help walk potential bidders through the tendering process and work alongside suppliers to secure the best outcome. This will doubtlessly demand a considerable mindset shift but could also introduce a valuable new feedback loop into the procurement process as buyers navigate their own procurement processes from the other side of the fence.
- The move towards simpler, more bespoke tender documents should keep suppliers focussed on the areas that matter most when responding. However, even though the quality of responses may improve, the increase in the variety of tender documents will mean further complexity when it comes to data capture and digitisation. This requirement will need to be considered now if systems are going to be ready for when the changes come into force.
- Earlier payment of suppliers should encourage engagement with a broader range of suppliers, but places additional administrative and financial burdens on contracting bodies. Early payment schemes, such as those offered by Oxygen, which are designed to manage the process of early payment as well as provide an additional income stream for the buying authority are likely to move further into the spotlight.
- The requirement for contracting organisations to publish their 18-month pipeline poses communication, administrative and systems-based challenges. However, it does open the opportunity for further collaboration between neighbouring councils and other public bodies, potentially leading to even better-informed procurement.
- Procurement is an information-led profession. This explosion in data has the potential to lead to a similar increase in the number of systems required to manage and understand that data. Early signs suggest that commissioning authorities will seek out solutions that can integrate and combine their data, making for easier adoption, better data analysis and more joined-up decision making.