A dynamic shift in procurement

shift in procurement
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Paul Smith, Deputy Managing Director at YPO, discusses the importance of Dynamic Purchasing Systems (DPS) to local authorities in a COVID-19 landscape in this procurement spotlight

Public sector procurement has changed in the UK due to COVID-19 and the consequences of effective practices in the short- term have never been greater. The long-term impact of COVID-19 on procurement is yet to be fully realised, but the growing popularity of Dynamic Purchasing Systems (DPS) signals a clear direction for the public sector.

Frameworks versus DPS

Traditionally, most councils spend through a framework. This is an overarching agreement that sets out the terms of trade, such as price, quality and quantity, under which individual contracts can be made throughout an agreed period. Once the umbrella agreement has been awarded through a framework, there is no opportunity for new suppliers to join until the next agreement is awarded, with this process taking place at a maximum of every four years.

“Flexible procurement is important in a COVID landscape but so is the compliancy of suppliers. There have been many high-profile stories that detail borderline exploitative procurement for essential equipment, as enterprising organisations have successfully profiteered from the pandemic via contracts awarded through PPN.”

Dynamic Purchasing Systems (DPS) overcome these barriers, enabling flexible alternatives to frameworks which impose no limit on supplier numbers and provide an ‘open system’ of procurement. With no time restrictions imposed by the regulations for suppliers to apply, DPSs offer buying organisations maximum flexibility to select from a highly competitive supply base.

Procurement problems

COVID-19 has caused unexpected spikes in demand for very specific circumstances that local authorities may have never considered before. For example, sourcing PPE in a global market, managing tactical IT needs to support flexible working, handling higher quantities of waste with a reduced workforce. Under traditional frameworks, compliant procurement simply may not have happened in a timely manner during lockdown.

The UK Government supported this problem by issuing Public Procurement Policy Notes (PPN) for quick essential items. Throughout this period, public sector organisations have had the flexibility to make tactical purchasing decisions under a (PPN), making contract awards without the traditional procurement process.

Whilst the PPN has now expired and had been used effectively by many local authorities throughout the COVID-19 pandemic, there is thought being given to how increased flexibility can be provided to the public sector moving forward. It will be interesting to see post-Brexit how the UK moves from the EU landscape to a UK led one.

Ensuring compliancy

Flexible procurement is important in a COVID landscape, but so is the compliancy of suppliers. There have been many high-profile stories that detail borderline exploitative procurement for essential equipment, as enterprising organisations have successfully profiteered from the pandemic via contracts awarded through PPN.

Local authorities are not to be criticised for all their responses, as the procurement landscape quickly became difficult to negotiate as the gravity of the pandemic became apparent. This does, however, highlight the need for flexible and compliant solutions.

Supplier access to a DPS is not automatic, and organisations are still subject to scrutiny. Although checks are less time-intensive than traditional procurement frameworks, they provide the necessary interrogation to ensure public money is spent appropriately.

Perks of a DPS

A DPS provides freedom for procurement heads and local authority decision-makers to concentrate their efforts and expertise on decision-making rather than overcoming barriers and time-intensive administrative procurement tasks. There are also significant economic and sustainability benefits to be had from using a DPS.

To use an example, a North of England local authority might use a food contract on a traditional framework that requires the haulage of products from a South of England-based supplier. Using a DPS alternative, the same North of England local authority could quickly identify a suitable local supplier to reduce the overall carbon footprint of the contract and boost the local economy.

There is an increasing emphasis on local authorities to generate regional economic growth as we all learn to live with COVID-19, with many being encouraged to increase support for businesses, re-design service delivery and source additional or new revenue streams. A DPS solution can address many of these new government demands with a simple change in procurement practice.

The future of procurement

The potential value to local authorities of using dynamic purchasing systems is clear. A DPS increases procurement flexibility, enables easier access to local suppliers and can be updated regularly with current solutions. Whilst this process is not as quickfire as PPN, it bridges a gap between the traditional framework driven practices and more contemporary methods.

This is not to say that there is no place for frameworks in the future of procurement, as there are still occasions where they can produce optimal results. Operating an effective DPS in an oversaturated market requires upkeep, so in this scenario, using a framework can ensure access to the best-suited suppliers on longer-term contracts. Currently, DPS can also only be used for the purchase of common goods, works and services so should be considered as part of a procurer’s full tool kit.

There are fundamental procurement lessons to be learned from COVID-19 and it is likely that different practices will be pushed further in future legislation. The important thing to remember now is that one size will certainly not fit all in relation to public sector procurement.

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Deputy Managing Director
YPO
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