Iain C. Steel, Chief Procurement Services Officer and Caroline Ramsay, Partner at UK law firm TLT LLP detail here their thoughts on buying innovation in the public sector
Public sector buyers have to contend with a range of competing priorities, whilst managing the demands of stakeholders, impossible deadlines and opaque governance processes. And that’s before we start on the dark art of the public procurement regulations. All of this must be done whilst ensuring value for money for their most fickle customer – the taxpayer.
Against a background of intense external scrutiny and a complex legal system, it’s not difficult to imagine why there could be a temptation to design procurement exercises with a nod towards the tried and tested. Not least to avoid a potential legal challenge if it goes awry.
So, is there any room to exploit the significant spending power of the public sector to drive innovation?
Public procurement procedures
By far the simplest and most common approach to public sector tendering is in the use of either the ‘open’ or ‘restricted’ procedures. These procurement procedures require bidders to submit a written response to a written document but do not afford an opportunity to discuss the bidders’ response. It is at this point we must question how innovative an approach is likely to be without having had the opportunity to engage in a meaningful way with your suppliers. These procedures do somewhat bolster the allegation of rigidity in the regulations, however, there are still things that can be done even here (see Opportunities below).
Less prevalent are the ‘competitive dialogue’ (CD) procedure and ‘competitive procedure with negotiation’ (CPN). Both of these permits a level of discussion with bidders within certain parameters. Like the open and restricted procedures, they still require the upfront documentation of the requirements and the mechanism by which the bids will be evaluated. However, they do permit a level of flexibility in approach and help the contracting authority to gain a better understanding of the solutions being proposed.
Behind in popularity again is the (relatively) new ‘innovation partnership’ (IP) procedure. This procedure is somewhat of a unicorn in the realms of public procurement, in that it is seldom seen in the wild. It does expressly permit the authority to “identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market.” Uniquely, this procedure permits the contracting authority to contract with multiple partners and permits the requirements to be performed in stages under a single procurement. With increased levels of adoption, this procedure provides a significant opportunity to drive innovation in the public sector.
Given the range of different procedural options available to the buyer, why is so much buying activity undertaken using the least flexible procedures? The answer is simple: time and money. Where the open and restricted procedures are used, the process can be conducted quickly and efficiently without the need for complex negotiations and governance processes. The CD, CPN and IP procedures are very effective in procuring optimised solutions to even the most complex requirements, but they are labour intensive and require investment from both the authority and the bidders.
YPO: Data centre and cloud framework
In August 2019, the YPO announced the launch of its Data Centres, Maintenance Cloud Hosting and Security framework for the public sector.
The new framework has been created to ensure data can be stored compliantly and accessed across several locations – either on-premise, off-premise or via the cloud. Utilising data centres and cloud technology is expected to support organisation within local government and education sectors, especially those operating across large estates and multiple sites.
The framework, estimated to have a total value of £400 million, is now live and will run until 31 July 2023.
It is divided into 12 lots: facility maintenance; enterprise hardware management; design; audit and consultancy; cloud, cloud services & hosting; build; managed service; business continuity and disaster workplace recovery; education services; colocation/shared hosting services; data security solutions; and network connectivity services.
This will be a key framework for many public sector organisations, especially those in local government and education where YPO is particularly strong, as they look to upgrade their infrastructure and accelerate their cloud ambitions.
To find out more, visit: https://www.ypo.co.uk/framework/detail/900300#framework_details
Over the last few decades, we have seen successive reports stating the importance of contracting authorities embedding the power of innovation into their procurement practices, to ensure that public services are not left behind. However, the counter to this is the perceived inflexibility of the Public Contract Regulations. It is true that the regulations are stringent, but much of the inflexibility is in the application rather than the design.
There are a number of things a buyer can do, irrespective of the procedure, to reward innovative solutions:
Engage the market
Don’t rely on only a Prior Information Notice (PIN) to attract the market to your procurements. This is a tried and tested (but not foolproof) way of buying where there is already a mature marketplace used to dealing with the public sector. But given that SMEs are a significant driving force for innovation, this approach is not going to necessarily attract the most innovative suppliers. Don’t expect the most innovative solution to land on your lap; you need to go out there and let them know you’re looking.
Output or outcome-based specifications
Where it’s appropriate to do so, this should be a given. It’s easier to evaluate the presence of a known set of inputs than giving suppliers free-reign to show what they can do for you, but allowing for flexibility generates innovative approaches.
When used in conjunction with a solid output specification, evaluation matrices bespoked to the questions allow the bidders to stand out in terms of innovation. Not only does it make your evaluators’ lives easier, but it also allows you to reward innovation where it counts.
If you think that permitting variant bids adds complexity, you are right. However, when used in conjunction with output specifications and bespoke evaluation matrices, innovation can be rewarded irrespective of the procedure chosen.
Proof of concept versus proof of solution
Don’t confuse proof of concept with proof of solution. If you go to the market with requirements incorporating proof of concept, this must be supplier agnostic. Incorporating a proof of concept is an excellent way of buying innovation, but it is a sure-fire way of inviting a legal challenge if this wasn’t allowed for at the very beginning.
The regulations don’t necessarily help in buying innovative solutions, but it’s possible to buy innovation compliantly. Innovation is happening in every marketplace, every day, everywhere. It’s incumbent upon us all to take note and consider how we can innovate in our approach. Our politicians demand it, our customers expect it, and we will all benefit when we get it right.