Procurement flexibility: A missed opportunity in the public sector
There is a considerable mismatch between the demands of the procurement function and the resourcing allocated in many public sector organisations which are dealing with ever constraining budgets and expectations that more can be achieved, writes Jeanne Copeland, founder and CEO of Greenville Procurement.This is aligned with increasing compliance and reporting demands, and obligations around sustainability with many also attempting to define, design, and implement digital transformation programmes.
It is worth noting the 2023 European Court of Auditors Special Report 28/2023 highlighted the increase of single bid scenarios peaking in 2021 at 42 per cent of all contracts. In the preceding 10 years, single bidding doubled across the EU and the number of companies submitting bids fell by over 50 per cent. This trend is not good for competition, value for money, or the taxpayer. At a time when we need the greatest innovations from technological and sustainable perspectives, we need more and not less engagement.
To try and meet these competing demands, public bodies need to maximise the benefit of every procurement action taking account of the flexibility that exists within the public procurement regime to support sound and strategic procurement decisions.
Maximising flexibilities within public procurement
The EU Directives are frequently blamed for poor procurement. However, the flexibilities within the rules are not used to their full potential. Open tendering is the primary procurement procedure used; but is it the right one? While suitable for many procurements it should not be used without due consideration and is invariably not suitable for high value, complex, high risk, or sensitive procurements. Many tenderers decide not to bid if it is an open procedure due to the cost of tendering, the overly burdensome requirements, and the reduced chances of winning. It also allows for no real engagement between the two sides within the process.
Multi-stage procedures are more appropriate – particularly for larger, high risk contracts – and reduce the time and effort on tendering when executed efficiently. In particular, the competitive procedure with negotiation and the competitive dialogue procedures allow for significant engagement with tenderers before any award decision is reached. Both of these procedures provide real opportunity for greater understanding of what is required and what should or could be tendered as a solution.
The duration of contracts and frameworks should take account of the total life cycle; the cost, resources, overall investment, and feasibility of changing provider in shorter periods, and the risks associated with change. While four years is the standard duration for frameworks (eight years for utilities), both Directives allow for longer frameworks in “exceptional cases duly justified, in particular by the subject of the framework”. Where a contracting authority is tendering a new IT system for example, a single party framework for a 10 or even 15 year period (or longer) is more appropriate, it reflects the reality of the investment, the evolvement of the requirement, and more competitive pricing while minimising the risk associated with more frequent tendering or change of provider.
In multi-party frameworks, Dynamic Purchasing System (DPS) arrangements or even qualification systems, contracting authorities should not limit themselves to the same award criteria for mini-competitions and should always give themselves the discretion to change the weightings – this provides significantly more opportunity for real competition. Using the same criteria and weightings for all mini competitions ultimately results in tender decisions coming down to cost only. Once that outcome arises, tenderers stop bidding as they cannot afford to be involved in a race to the bottom. It also prevents the possibility of increasing weightings in area such as sustainability as the market develops more capacity to offer more sustainable solutions.
Maximising participation and competition
One of the considerations in designing procurements is to understand the size and scale of the market likely to bid for contracts and how to design the process to maximise participation.
Seeking overly high levels of insurance is a clear barrier. It is essential that a meaningful risk assessment is completed, including taking account of the value of contracts likely to be awarded under a procurement mechanism and not just the total value assigned over is lifetime. Insisting insurances are in place at time of award for contracts or single party frameworks, is appropriate. However, it may be overly burdensome for panels, qualification systems, DPSs, or multi-party frameworks where no contracts are guaranteed and confirmation of agreement to implement would be sufficient in many cases.
Requirements to have Article 57 declarations witnessed by Commissioners of Oaths or other independent witnesses is unnecessarily onerous on bidders. This has been reflected in case law from the Court of Justice of the EU in Ambisig C-46/15 with the Court describing it as “excessively formalistic when compared to the straightforward declaration by the economic operator”. This witnessing element should be eliminated as a mandatory requirement. Indeed, the requirement to complete both an Electronic Single Procurement Document (ESPD) and an Article 57 declaration is also excessively bureaucratic as an unnecessary duplication.
Another requirement used without questioning is previous experience, commonly requesting three previous contracts – why? Its purpose is to give confidence that candidates or tenderers have a track record of delivering comparable contracts.
At the very least, what is being asked for from suppliers should be subject to some critical analysis as part of the design stage, moving away from formulaic practice and trying to put ourselves in the shoes of suppliers, considering what we really need demonstrated.
Conclusion
In summary the Directives provide options to engage in better practice serving both the buying and supply side. Contracting authorities have the freedom to reduce the burden on tenderers, the examples provided above are some of the most common, however, there are many ways to maximise the flexibilities, but it does require us to think differently.
