What improvements can we make to the way we buy?

What is the challenge?

Councils need to be sure that they are focusing their efforts in the right places and keeping the procurement process itself as simple as possible.

In the public sector the importance of ‘procurement' in the narrow sense (the stage between the contract notice and contract award) has often been overstated.

Overall, the real keys to commercial success (striking a good deal and making sure it is delivered) are pre-procurement planning (including being clear about the outcomes you want), good contract design and specification, effective market engagement and robust contract and supplier management.

The main objective in the procurement phase should be to minimise the time, cost and effort to procure for both the authority and bidders including, in particular, SME bidders.

The pre-procurement focus should be on:

  •  signalling of future requirements to the marketplace
  •  market shaping (‘market facilitation' in the social care context) to stimulate activity where there are gaps
  •  two-way engagement with potential suppliers (‘market engagement')
  •  getting the contract design, specification and other procurement documents right.

All the benefits of this planning will be lost without effective contract and supplier relationship management once the contract has been award. This includes performance management, continuous improvement and cost control (see, for example, Making Savings from Contract Management).

As mentioned in the section above, all of this activity can be undertaken by authorities working together. Among other things, a joint approach enables councils to take a more strategic approach to the management of key suppliers to the local government sector.

Finally, councils need to have confidence that they have appropriate strategies and internal controls in place to manage the risk of fraud and corruption in both procurement and contract management as the losses in this area can be significant not to mention damage to the council's reputation (Managing the Risk of Procurement Fraud).

The diagram below illustrates the best practice approach (seen from the UK Government point of view). Click image below to enlarge.

How can we use the PCR 2015?

Focus on market engagement
The PCR 2015 now expressly allow market engagement (‘preliminary market consultations') as part of pre-procurement planning and describe appropriate measures to be taken to prevent competition being distorted.

This confirms the value-adding role of market engagement and provides reassurance that it does not conflict with the EU rules.   

Use a PIN instead of a contract notice 
There are new options for the notices used to advertise contracts (‘OJEU notices'). Under PCR 2015 councils can now choose to publish a prior information notice (PIN) to advertise requirements and invite interested suppliers to confirm their interest in bidding for specific contracts at a later date.  This does away with the need for individual contract notices.

This use of a PIN is allowed when the council is using the restricted procedure or the competitive procedure with negotiation to award the contract (see new procurement routes).

A PIN can also be used to advertise requirements for Light Touch Regime services (see below on designing appropriate procedures for social care).

Normally, a PIN used in this way is valid for up to 12 months but when used for Light Touch Regime services it can cover a longer period.

The period between publication of the PIN and the invitation to confirm interest is an opportunity to carry out a type of market engagement before deciding on the final approach to the market.

This can be particularly helpful in social care and health with all the complex changes that are taking place.

Speed up procurement 
Minimum time limits for procurement procedures have been reduced by approximately one third in most cases.

As the procurement phase is now short, effort can be focused on the value-adding parts of the process:

  •  market engagement and getting the contract design and specification right.
  •  effective contract and supplier management. 

Choose the best procurement route 
Councils can continue to use the familiar open procedure or restricted procedure for ‘off the shelf' requirements.

The restricted procedure is most useful where there is a genuine need to pre-qualify bidders or there are potentially a very large number of bidders in the market (this will be confirmed through market engagement).

Otherwise, the open procedure is fastest and simplest route.

However, there is now greater flexibility to use negotiation for complex or innovative requirements.  There are three different procurement routes to choose from:

  •  competitive procedure with negotiation (CPN)
  •  competitive dialogue (CD)
  •  innovation partnership (IP).

For more information on those routes see What are our options for major projects?

Design appropriate procedures for social care 
There is now a requirement to advertise contracts for social care in Europe (meaning competition for the contracts).

However, provided that councils stick to certain general principles (equal treatment, transparency etc.) there is an opportunity to design procurement procedures which are appropriate to these services. There is no obligation to use the main EU procedures for social care.

This is referred to as the Light Touch Regime. It applies to social care procurements above a €750,000 threshold (currently £625,050). It applies in the same way to health, education, cultural and certain other services.

As mentioned above, advertising can take the form of a prior information notice (PIN) which remains valid for a considerable period of time. 

Tackle poor performance by suppliers 
The PCR 2015 have clarified that references can be taken up as part of the selection process to establish whether bidders have the necessary professional and technical ability to perform a contract (i.e. they meet ‘selection criteria').

In addition, councils have discretion to exclude bidders which have shown ‘significant or persistent deficiencies' in performance (‘exclusion grounds'). 

In order to take advantage of these new opportunities it will be important for councils to record supplier performance, including the use of sanctions under contracts, and for councils to be willing and geared up to provide references to others. 

Improve control of sub-contracting 
Councils have the right to receive information on sub-contractors and can carry out checks on sub-contractor suitability.

This includes the sub-contractor's past performance.

Where necessary, a main contractor can be required to replace a sub-contractor. 

Control changes to contracts
A series of European Court cases created uncertainty about the extent to which contracts can be varied without triggering an obligation to go back out to tender. The case law has been incorporated into the PCR 2015.

The new clearer rules on changes to contracts (‘modifications') will give councils confidence to make necessary changes to the way services are delivered in order to achieve better outcomes or make savings.

Combat procurement fraud and corruption 
The new flexibilities in the rules have been balanced with stronger controls which councils can use to help combat fraud and corruption in procurement.

There are strengthened ‘audit trail' requirements including documenting the progress of procurement procedures. 

A report must be prepared on every contract recording information such as the reason for using certain procedures (competitive procedure with negotiation, competitive dialogue and negotiation without prior advertising) and for decisions that have been taken. It must also identify any conflicts of interest and the measures that were taken in response.

Suppliers convicted of offences such as bribery must be excluded from bidding for council contracts and councils have discretion to exclude suppliers where there is a conflict of interest, anti-competitive agreement or the like (see selection).

28 January 2016