Innovation in procurement & procuring innovation

The need to confine procurements to specific, detailed processes, and customers’ (understandable) concerns about legal challenge if they depart from the regulations, may indeed stifle creativity and create a culture of low appetite for risk and experimentation.

For example, one of the most familiar aspects of the current procurement regime is tension between the flexibility offered by competitive processes, which allow negotiations with bidders, and the simplicity afforded by the more straightforward procedures.

“The public sector spends around £300 million a year on goods and services. This represents a third of all public expenditure.”

Competitive processes can be unappealing to the market, and indeed buyers, for all but the largest procurements given the relatively high transactional costs involved. Conversely, the simpler processes can result in legal risk to buyers if negotiations are ultimately required to deliver the best deal.

Challenging the existing procurement culture is, of course, an easier thing to say than do, and the Government concedes that it will take time. As an example of a practical measure, the Green Paper on procurement reform (Green Paper) proposes a radical simplification of process into:

• A flexible, competitive process, allowing negotiations and an innovative approach;
• An open procedure for “off the shelf” procurements and;
• A limited tendering procedure for use in cases such as extreme urgency.

The Government hopes that this relaxation of procedural requirements and easing of the distinction, arguably artificial, between competed and “standard” procurement processes, will play a role in freeing public sector bodies to explore more pioneering approaches. Responding to concerns that flexible, competitive processes could lead to a diffuse approach to procurement, with resulting uncertainty and concern over increased risks of challenge, the Government’s response to the Green paper (Response) promises detailed guidance to ensure consistency.

It will be interesting to see whether the balance between a flexible approach, and reasonable levels of transparency for suppliers and risk mitigation for customers, can successfully be struck.

Focus on principles & the need for proportionality

Providers’ common concerns about customers’ approaches to procurement include:

• Onerous submission requirements which are costly and resource-intensive;
• A lack of genuine dialogue, often driven by understandable concerns about equal treatment and the need to follow a strict process and;
• Low levels of constructive market engagement – again, perhaps fuelled by a legitimate wish to protect the integrity of the transaction.

It is no surprise that small-medium enterprises (SMEs), and other less well-resourced suppliers without access to the full apparatus of a professional bid team, are disproportionately affected by these approaches. By discouraging the participation of agile suppliers, procurement can constrain innovation.

As a result, the market may welcome the Green Paper’s proposed focus on principles, such as fair treatment and value for money, rather than a detailed process. However, the Response has largely dropped a commitment to an overriding principle of proportionality, which will instead be incorporated into specific parts of the regulations, for example, in relation to timescales.

Those looking for flexible procurements which support innovation may see this as a disappointing outcome unless the new regime genuinely embeds proportionality and, crucially, gives customers the guidance and comfort they need in order to avail themselves of any wider latitude offered to them.