Across the globe, procurement reforms are driving a diverse range of behaviours. Below I address some of the resulting changes and their consequences and discuss what it all means for your strategic procurement projects.
Some of the changes we’re seeing:
- Greater transparency, fairness and openness in public sector procurement. This includes any localisation by the applicable government legislation and establishes a level playing field for bidders for goods and services in different jurisdictions.
- The desire to obtain better value for money from public sector procurement. For example, the introduction of procurement ‘pathways’ that facilitate better buyer-bidder communication, prior to and during the competitive stages of the procurement to refine the requirements and scoring criteria. This has been evidenced by various UK public sector bodies, including the UK MOD, introducing new methods of combining financial and non-financial evaluation criteria to select ‘value for money’ solutions.
- The appetite to address social, community and local economic benefits as part of the procurement process. Both the UK Social Value Act and the Canadian Industrial and Technological Benefits (ITB) Policy have supported project teams in incorporating social value criteria into their procurements. The ITB policy leverages defence and security procurement to create jobs and economic growth, requiring companies that are awarded defence contracts to do business in Canada equal to the value of their contracts. This will only become a bigger topic worldwide, as the desire to ‘do the right thing’ locally through smarter procurement gains traction.
- The demand to embrace new technology – in particular ‘electronic tendering/auctions’. Examples of this include new framework concepts that allow suppliers to be added onto contracts during their lifetime, meaning buyers can be immediately reactive to new developments and offerings from the market.
- The need to reduce the administrative/legal overhead and legal risk associated with public procurement. The clarification and streamlining of rules around tendering processes and requirements for debriefing and standstill periods are examples of this practice.
What behaviour has this procurement reform driven?
- A much greater appetite for legal challenge of public sector competitions by industry. Over the last couple of decades there has been a massive increase globally in the appetite for challenge for various reasons. There’s now a substantial market for legal support for ‘failed bidders’ plus a number of off the shelf ‘cheap-as-chips’ support packages that bidders can make use of to start the legal challenge process ‘in the hope of it coming to something later’.
- Many public sector buying organisations have focused, maybe disproportionally, on reducing procurement process legal risk, even at the cost of ‘buying the wrong thing’. An example being the reticence to engage industry in early discussions around the requirement and competition rule set.
- Buyers are caught between conflicting demands. For example, the desire to make the procurement process more efficient and drive cost savings from suppliers has driven buyers to consolidate spend into fewer, larger, contracts. This has tended to favour the bigger, more established contractors, resulting in counter initiatives to find ways of opening competition to SMEs and local businesses who can offer better social and local economic value.
- Bidders have become more sophisticated in their analysis and solution optimisation during the bidding process, making use of the latest methods to position themselves against their competition. A more transparent procurement process has given bidders a better understanding of how their tender will be scored, helping them to maximise their chance of success.
- Confusion amongst bidders about how to include social value criteria in their submissions and how this will be tracked and measured in line with other factors. Engaging with buyers earlier in the process has provided greater understanding of the project’s priorities and how these will be weighted, enabling bidders to clearly demonstrate how they can deliver against the key objectives.
What does this mean for my projects?
- Your projects should be open and fair with a clear audit trail. Ensure you can justify your decisions to help protect your decisions from scrutiny and legal challenge – every step of the way.
- Make sure you get value for money from your marketplace and understand the commonly used methods: typically, the cheapest compliant or Most Economically Advantageous Tender (MEAT) – to avoid unwanted and unforeseen outcomes.
- Include social value in your strategy to ensure you identify and measure the long term economic, social and environmental impacts of your procurements – wrap it up into your criteria set with appropriate weighting.
- Ideally, more sophisticated bidders mean higher quality bids. Establish clear objectives right from the outset to ensure quality conversations with bidders. A clear and structured approach will ensure you stay focused on what you’re buying and help you select the best supplier.
I’d love to hear about your experiences of current procurement reform and change, or any thoughts you have on the changes that the next decade may have in store.
If you’d like to know more about the ways Commerce Decisions’ expert software and services helps you improve value for money, identify the best approach for a winning bid or to learn more about any of the themes mentioned above, please contact us.