PLC Public Sector reports:
It’s a truth universally acknowledged that the public sector can do more to engage with its suppliers before starting a procurement process. According to Procurement Policy Note – procurement supporting growth (Action note 04/12), published by the Cabinet Office on 9 May 2012, public authorities have been relying on the competitive dialogue procedure “as a means of engaging in dialogue with suppliers, instead of engaging in thorough pre-market engagement to understand the market and supplier offerings prior to going to market”.
Market engagement: helping suppliers to work with the contracting authority
Furthermore, the Note states that all but the most complex procurements (examples of which include PFIs and those requiring the formation of a new legal structure) should be completed within 120 working days.
Aside from over-zealous use of the competitive dialogue procedure, the way the other procurement procedures are often used is also seen as unnecessarily complex and, anecdotally, act as a barrier to SMEs wishing to bid for public contracts.
The government and various public sector agencies are doing their best to reassure purchasers by publishing guidance explaining how they should be interacting with the market (for example, see Legal update, Cabinet Office unveils “Solutions Exchange” to promote supplier engagement and Buying into communities: Jobs, skills training and business opportunities from council contracts).
Suggested measures in the latter document include:
- Simplifying processes, for example reducing unnecessarily onerous thresholds for financial standing.
- Providing clear information on the contracting authority’s strategies, policies, procedures;
- Publishing details of the authority’s spend and suppliers.
- Providing training to suppliers on how to bid for work, including template documents with model responses.
Market testing: using suppliers to define requirements
These measures will help engagement once a decision to procure has been made. But few public sector purchasers have real expertise in engaging with the market to determine how a service could be delivered differently, and then building on supplier expertise to develop the procurement strategy and contract. There appear to be several reasons for this, including:
- Widespread concern among public sector purchasers about the extent to which consultation with the market is permitted under the procurement rules. (The Commission is attempting to address this concern in its reforms of the procurement directives. Article 39 of the proposed new directive (replacing 2004/18) provides that “contracting authorities may conduct market consultations in order to assess the structure, capability and capacity of the market and to inform economic operators of their procurement plans and requirements”. Article 39 goes on to clarify how to treat suppliers who have advised the contracting authority or been involved in the preparation of the procurement to avoid them receiving an unfair advantage. For more information on the proposed new directive, see Practice note, Reform of the EU public procurement regime.
- Enormous variety of goods, services and works being procured centrally by employees with limited knowledge of each sector and no relationship with existing suppliers.
- Lack of (human) resources leading to panic buying without allowing sufficient time to plan pre-procurement engagement.
- Lack of understanding of the pressures and drivers on the supplier market.
Where market testing is occurring, this tends to be on the larger projects. While this is understandable, some smaller or Part B services contracts are typically delivered by less sophisticated suppliers who may be harder to engage. And, for local authorities, these suppliers are where the bulk of their spend goes. The market for health and social care services has changed rapidly, and is continuing to change as the population ages and the cost of residential or in-patient care places more demand on alternative support solutions.
So how should public authorities approach market testing? It is worth thinking about the following:
- What stage is the authority at in examining the current or future provision? Does it know what it wants and simply needs to determine how best to deliver it? Or does it need the market to design the solution? The answers to these questions will dictate the approach and questions.
- How will the authority carry out the market testing exercise? Face to face discussions are usually more productive, and attract more senior employees, than plenary sessions or sending off a questionnaire to a nameless person.
- How will you identify who to engage? If you consult with existing suppliers only, you may only get what you’ve always got. Consider engaging with individuals or groups in different but related service sectors.
- Make sure you elicit information on the supplier’s motivations. This is often the most difficult area for public sector purchasers to second guess. Find out what’s in it for them.
- Use the opportunity to quiz suppliers on what they see end users wanting. Often, and especially when a service is already outsourced, public sector buyers will be more removed from the end users than the suppliers. Their insights into what the end users need from the service may be telling, and could help focus discussions on outcomes rather than inputs.
For example questions to be used in a market testing exercise, see Standard document, Public procurement: Market testing, Questions for the supplier market.