Late last year, the Cabinet Office published a green paper on the future of procurement regulation in the United Kingdom. The paper heralds what could be the most significant and far-reaching changes to Public Sector procurement in a generation.
Within the paper, it proposes some significant changes to the current regulations, and several underpinning themes can be seen consistently within the document.
Running throughout the paper are themes of simplicity, flexibility, transparency, value for money, and procurement in the public interest. Let us take some time to look at each of these themes in turn and understand what they might mean for Public Sector procurement beyond 2021.
One of the overwhelming themes in the Green Paper is one of simplicity. It makes great strides to reduce the complexity and over-engineering of the current regulations, the Public Contracts Regulations (2015). Bearing in mind the current regulations (PCR 2015), were effectively the OJEU (Ofﬁcial Journal of European Union) procurement regulations codified into UK law, and the UK has now completed the Brexit transition, it makes absolute sense that the Government is trying to devolve itself of some of the most maligned, and overly complicated aspects of the OJEU regulations.
The proposed new procurement legislation will be a single piece of legislation replacing the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011.
But that is not where the simplification stops……that is only the tip of the iceberg.
The new procurement legislation proposes to replace the existing seven procurement procedures:
- Open procedure;
- Negotiated procedure without prior publication;
- Restricted procedure;
- Competitive dialogue procedure;
- Competitive procedure with negotiation;
- Innovative partnerships procedure, and
- Design contests
These will be replaced with three proposed procedures:
- Competitive Flexible Procedure
- Open Procedure
- Limited Tendering Procedure
2.1 The competitive flexible procedure
The competitive flexible procedure would be like the existing “Light Touch Regime” which can currently only be used to procure specific social, health and other services. This will give procurement staff maximum flexibility to design a procurement process that meets their needs and the needs of the market. This new procedure would replace five of the existing procedures: restricted, competitive dialogue, competitive procedure with negotiation, innovation partnerships and design contests.
The new procedure is intended to introduce much greater flexibility within a single process. It will allow buyers to build in stages of negotiation and deploy modern commercial tools such as reverse auctions. The proposed procedure would be suitable for a wide range of procurements including:
- simple requirements where an initial selection stage is needed to limit the number of bidders, for example, to meet specific technical requirements to bid.
- for complex requirements where negotiations with bidders would be beneficial in helping them understand the requirements and/or in delivering better value for money and innovation;
- for procurements where the contracting authority may not want to limit the field through an initial selection stage without first evaluating the product, technology or software being offered; this would be particularly useful where a prototype or other practical demonstration is required;
- for procuring innovative products or services using a phased approach to develop the solution(s).
The competitive flexible procedure will be a dynamic tool that can be used to deliver everything from a straightforward ‘restricted’ process to a more complicated, and multi-stage ‘competitive dialogue'. Some conservative procurement teams may be wary of the high degree of flexibility it affords, whilst others will relish the opportunity to be more creative within the constraints of the legislation.
2.2 The open procedure
The green paper proposes that the open procedure should be retained in its current form as a standard procedure available to contracting authorities and extend its availability to suitable defence and security procurements. While it would be possible to undertake a process akin to the open procedure through the new competitive flexible procedure, there is merit in retaining the open procedure. It is the most popular procedure and will continue to be appropriate for simple requirements where an initial selection stage is not needed. It will also be useful to have a default standard procedure for inexperienced buyers.
2.3 The limited tendering procedure
This process is simply the ‘negotiated procedure without prior publication’ which will be renamed as the ‘limited tendering procedure.’ The application of this process would be the same, in that it is expected only to be used in cases of extreme urgency, or exceptional circumstances.
The contracting authority will need to document their analysis to demonstrate that their decisions are fully justified. The grounds for using the procedure will remain broadly unchanged from the current regulation 32 of the PCR which are summarised as follows:
- absence of tenders or suitable tenders in an advertised procurement;
- artistic reasons, technical reasons, or exclusive rights.
- extreme urgency;
- for the purchase of research and development goods;
- additional purchase of goods where a change in supplier would result in technical difficulties;
- purchase of goods on commodity markets;
- purchase of goods on advantageous terms due to winding up or bankruptcy;
- design contests (will be removed as the procedure will cease to exist);
- repetition of works and services in limited circumstances.
The significant reduction in processes from seven down to three is welcome, and will no doubt contribute to a much-needed reduction in the over-engineered and unnecessarily bureaucratic range of current choices.
As can be seen from the introduction of the competitive flexible procedure, there is an appetite for flexibility in the proposed new legislation.
Beyond the flexibility inherent in the competitive flexible procedure, it can also be seen in some of the other proposals – such as the changes to both Frameworks and Dynamics Purchasing Systems (DPS).
3.1 Flexibility in new framework formats
The green paper proposes the continuation of the current traditional framework, which has a maximum term of 4 years and once awarded, no new suppliers can be added throughout its duration. This will be renamed as a ‘closed’ framework.
In addition to the traditional ‘closed’ framework, the Cabinet Office proposes the creation of a new classification of framework. This new framework would have a maximum permissible term of up to eight years, with an initial (up to) three year closed period. This new classification of framework would be called an ‘open framework.’
The open framework would allow any supplier to submit a bid to join the framework at predetermined points. If the procurement team wishes to have a framework with a duration of longer than four years, the framework must be opened at least once after the third year for new entrants to join. The contracting authority would need to advertise the re-opening of the framework in a notice and assess new applicants by applying the same requirements and evaluation criteria as applied when the framework agreement was originally awarded.
3.2 Flexibility in new DPS formats
There is also a proposal for a new DPS format within the green paper. Called DPS+, it is ostensibly the same process as the current DPS but now clarifies that the DPS+ can be used to procure all goods and services, not just the ambiguously defined ‘commonly used’ goods and services in the current regulations.
The flexibility of a dynamic system which allows suppliers to be added throughout the duration of the process remains, and is complementary to the theme of flexibility in the new proposals.
Increased demand for transparency underpins the entire Green Paper. It can be found in almost every aspect of the proposed new legislation.
4.1 The Open Contracting Data Standard (OCDS)
However, perhaps the most significant is the proposed introduction of the Open Contracting Data Standard (OCDS). The OCDS is a free, non-proprietary, open data standard for public contracting implemented by over 30 governments globally. The OCDS describes how to publish data and documents at all stages of the contracting process. It is the only international open standard for the publication of information related to the planning, procurement, and implementation of public contracts and has been endorsed by the G20 and the G7.
The Government proposes to legislate to require all contracting authorities to publish procurement and contracting data throughout the commercial lifecycle in a format compliant with the OCDS. This means data for buyers, suppliers, contracts, spend and performance would be held and published in OCDS-compatible, open, non-proprietary reusable formats. Contract award data, including call offs under framework agreements and DPS+, would include details of the buyer, supplier, bidders, and a unique contract identifier.
The Government also proposes setting out a timetable for all e-procurement and related systems across the public sector to become OCDS compliant and interoperable with other public procurement systems. Contracting authorities would be able to buy market-led commercial systems and software from providers if they meet their obligations on standards and interoperability.
In addition to the OCDS, the Government proposes the establishment of several registers of information which will complement the OCDS.
4.2 Register of Suppliers
The Government proposes establishing a single place for suppliers to submit the common data needed for procurements in an evidence locker to allow suppliers to ‘tell us once’ across the public sector. All contracting authorities would be required to use this data in their procurements. The service would allow suppliers to register once, providing all the information needed to qualify for a public sector procurement.
4.3 Register of Commercial Tools
The Government proposes requiring contracting authorities to record commercial tools such as framework agreements and dynamic purchasing systems that are available to other contracting authorities on a central register. This register would form part of the central platform and would be available to all commercial teams to help them identify collaborative commercial agreements that can deliver the best value for money.
Any fees levied by Contracting Authorities or Procurement Consortia would also need to be declared in full in this register. This will still be a welcomed enforcement of transparency, as there are several procurement consortia that steadfastly refuse to publish the fees they charge their suppliers.
4.4 Register of Contract Performance
The Green Paper proposes requiring contracting authorities to record and publish key performance information on contracts including key performance indicators and contract amendments’ prices and volumes. This could be completed directly by the contracting authority or passed on to the supplier to complete as part of the contract, however, the contracting authority should remain responsible for the timely and accurate completion of the data throughout the contract term.
4.5 Central Debarment List
The Government is considering implementing a central debarment list. Under this proposal, all suppliers which are debarred from public procurement opportunities because either a mandatory exclusion ground or a relevant discretionary exclusion ground applies should be identified in a central register, available via the central platform (OCDS).
5. Value for Money
It would be alarming if there was not a focus on value for money. However, there is a subtle, but particularly important change of perspective here which is perfectly illustrated by the change in how bids should be evaluated.
5.1 Evaluation Methodology
Currently, bids are evaluated based on the most economically advantageous tender (MEAT), but it is proposed that moving forward they will be evaluated based on the most advantageous tender (MAT). The removal of the word ‘economically’ may seem innocuous, but is critically important.
5.2 The Hackitt Report
The Grenfell tragedy and subsequent Hackitt report underlined the potential dangers of a ‘race to the bottom’ mentality when evaluating price in public procurement. The removal of ‘economically’ - which may skew peoples interpretation towards price, signals that the Government has taken on board some of the key outcomes from the Hackitt report.
This does not mean that price is irrelevant. But it does mean a focus on value for money, rather than price alone – a crucial difference.
6. In the Public Interest
One of the most interesting phrases found repeatedly throughout the proposed procurement changes is that of ‘in the public interest.’
The green paper states that all fees charged via frameworks or DPS’s by contracting authorities or procurement consortia should be solely ‘in the public interest.’
This may very well be a conscious effort to limit the private sector profiteering of public sector procurement activities. There are several procurement consortia who are either entirely owned by a private individual(s) and they ‘piggy-back’ on the contracting authority status of a compliant public sector organisation or are managed by a private sector management firm. The consortia can charge significantly large fees to suppliers (or customers) to ensure shareholders receive a healthy remuneration, owners are handsomely paid, or management companies make strong profits.
It will be exceedingly difficult for these ‘private’ procurement consortia to justify their fees being used in the public interest.
In summary, the Government’s Green paper proposes some significant and welcome changes to public procurement. The simplification of processes used will be greeted with open arms. The transparency will be welcomed by most quarters. The focus on the ‘Public Interest’ is laudable (although it may be problematic for some).
However, the green paper is the first step in a journey that could take up to two years before the new legislation is finalised and codified into UK law. But that also means that there is an opportunity to debate and inform the legislation along the way. The Cabinet Office is actively seeking opinions from procurement professionals. I have been asked to contribute my thoughts and opinions (for what they are worth).
The journey ahead for Public Procurement is moving in the right direction, but there will undoubtedly be some challenges along the way……
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