Need

A procurement process that balances the need to enforce procurement regulations with the need to ensure the most effective discussion with potential providers to select the best bidder.

Problem

Sometimes the public sector can use an overly complex procurement procedure when a simpler process - and more effective pre-procurement engagement with suppliers - can contribute to better outcomes for all parties.

Solution

Measures to simplify procurement procedures and reduce the cost are already being promoted by government. Complex procurement procedures and pre-qualification remain a tool open to market makers, but the experience of many bidders is that many areas of public sector procurement remains unnecessarily complex and process drive, when in fact the contracting process should be the part of a wider market management process where more time and effort is spent on improving the quality of communications with supplier prior to engagement, particularly where the policy objective is new or complicated.

Need

Structured engagement with existing and potential suppliers outside of specific procurement processes.

Problem

The best market management strategy should plan for structured engagement and relationship development plans with key target providers, and/or groups of providers, to ensure they are encouraged and incentivised to bid for contracts when they subsequently appear.

Solution

It should never be assumed that existing suppliers, or the top suppliers in any market, will automatically bid for any contract that is put into an invitation to tender. Good preparation in advance is more likely to result into bids from a more diverse range of potential suppliers. Suppliers are clear that the earlier the engagement is, the more likely they are to be able to provide a solution that meets the strategic priorities of the market.

Service redesign requires the market to have a strong understanding of what the council wants to achieve. Early engagement with potential suppliers whilst scoping out the service transformation goals can help councils create a strategy that is both transformational and commercially attractive to potential bidders. These initial conversations give councils an indication of what innovations the market can provide.

The Commissioning Academy has been set up to help council commissioners manage their markets, from structuring pre-market engagement through to contract management.

Existing trade bodies, such as ersa, allow for smaller suppliers to get a better representation and early view of market developments.

Need

Effective dialogue between political, commissioner and supplier senior managers to ensure sensitive markets operate effectively.

Problem

Where a market is at risk of short-term change due to political requirements - such as an unexpected shift in demand or a change in desired outcomes - potential suppliers may be inhibited from bidding if there is significant financial risk as a result.

Solution

Effective dialogue with bodies representing all types of suppliers is important to provide reassurance to the market about the operation and sustainability of new and sensitive services. Market managers must ensure there is effective information sharing and early notice of potential changes.

Commissioners deal with a number of sensitive areas subject to political risk: children's services and adult social care, for example. Political and financial risks that are inherent to any service need to be measured and discussed with suppliers to ensure that risks can be mitigated sufficiently to ensure a contract remains viable. The political sponsor of the contract will need to build consensus across local stakeholders to provide a degree of security to suppliers. Commissioning leads will need to engage in effective dialogue with suppliers and communicate the potential risks so that suppliers can factor this in.

Suppliers will also need to recognise ministerial directives and impacts to timings.

Existing trade bodies, such as ersa, allow for smaller suppliers to get a better representation and early view of market developments.

Need

Where PQQs are used, they must ask only the necessary information required to make informed pre-selection choices, in the interests of reducing the cost and time burden for suppliers and to focus more effort on the quality of discussion with the market.

Problem

Despite progress in reforms, many suppliers still report many PQQ processes as burdensome and a barrier to market participation; this is particularly the case for many smaller and medium-sized firms without dedicated procurement resource.

Solution

Where pre-qualification is used, it should follow the latest guidance and limit questions to those required by existing regulations or directly pertinent to the delivery of the service required. For smaller and non-commercial suppliers particularly, repeated requirements to provide slightly different information to different parts of the public sector on different bids is cited as a frequent cause of dissatisfaction with doing business with government as a whole.

Pre-qualification questionnaires (PQQs) need to be used prudently. Variations in patterns of usage across local government can act as a barrier to suppliers, particularly to local ones, which are required to provide the same information in different ways often, which requires time and resource, adding to the costs of bidding. A council leadership should set clear goals and a strategy for all commercial decisions that help procurement teams use pre-qualification more effectively and focus more time on supplier communications.

Need

Ensure commercial and other suppliers have a full understanding of the prospects for a market as early as possible in order to encourage investment in new services, skills capabilities and to explore potential new partnerships that can provide more effective bides.

Problem

It is not always that the case that suppliers expected to enter a market and bid for contracts are guaranteed to do so.

Solution

The best market management strategy use structured engagement with groups of providers to encourage and incentivise them to bid for contracts. It should never be assumed that existing suppliers, or the top suppliers in any market, will automatically bid for any contract that is put out to tender. Good communication in advance of any OJEU notice is more likely to result into bids from a diverse range of potential suppliers. Companies will make choices about investing in new markets often months and years in advance, based on the prospects of a flow of potential contracts and a likelihood of winning business. The earlier suppliers can be aware of new commercial opportunities, the more likely it is that the case made to pursue these opportunities will be successful and the supplier will make a conscious decision to invest in a market.

Need

The right size of contract sufficient to be commercially attractive to the widest range of suppliers while securing the economies of scale and benefits of service aggregation needed by the public sector customer.

Problem

Market managers will often face trade-offs between contract scale and market diversity. Where a contract is too large for some smaller suppliers to consider bidding, the competitiveness of a supply market can be inhibited.

Solution

Where a contract is too large for smaller suppliers to consider bidding, the competitiveness of a market can be inhibited. New procurement regulations make it easier to break down contracts into smaller lots in order to encourage smaller and medium-sized suppliers to bid. Used prudently, the right balance between sufficient scale and accessible contract size is likely to pay off in terms of attracting new bidders, yet still remaining commercially attractive to larger suppliers.

Need

Full visibility of market opportunities is crucial to improving the range and number of providers coming into a market.

Problem

Ensuring that when contract opportunities open up within a market that they are visible and accessible to as wide a range of suppliers as is required.

Solution

smaller and medium-sized firms and charity and social enterprises bidders, who often will lack any dedicated procurement team, will require innovative and proactive approaches on top of standard online platforms to augment their understanding and awareness of opportunities. Significant effort is required well before the tendering process, online and through existing supplier marketing, to build awareness of market objectives and give potential providers a sense of what they can expect. This active marketing shoud engender a greater readiness to respond to tenders when published.

Regional procurement portals provide additional visibility of opportunities to suppliers. Local portals should cover as wide an area as possible and encourage councils to procure together. Local portals should be used in conjunction with Contracts Finder, and not as a substitute.

Need

A contracting model that provides a way to maintain the public sector's delivery capability and draw on its as appropriate to ensure service continuity in the event of a provider failure.

Problem

New suppliers in a market will take time to develop the appropriate capacity and approaches necessary to deliver a service.

Solution

A contract model that provides for a public sector team to 'step in' and take over some or all elements of service delivery in the effect of sustained poor supplier performance or financial failure, to ensure quality of provision and user needs. Such an intervention is necessary to provide reassurance to end-users about service capacity. Where intervention is undertaken, market managers require a clear strategy and work initially with any provider to mitigate service or financial issues before any decision is taken to step in. Doing so will have implications for how end-users and other suppliers view the short-term and long-term operation of the market and should only be taken within a wider understanding of likely market impacts.

This is particularly important due to the public stafety concerns in this market.

This is particularly important due to the social value and importance of welfare services as a key public service in the UK.

Need

An active approach by the public sector customer to generate understanding of commercial opportunities available among as broad a range of potential suppliers as is required.

Problem

Where a market does not exist or a major new transformative agenda is planned, suppliers - and their board of directors, in many cases - will need to be convinced of the commercial potential and have a picture of long-term sustainability, in order for them to develop the necessary resources and to price accurately.

Solution

Market managers must actively work with potential suppliers well before any pre-procurement process to build a picture of what the market could offer. Suppliers need to clearly understand what any commissioning body wants to achieve and the levels of likely demand and initial risk profile, in order to make decisions about bidding. Early and structured communication helps build trust in the market vision and allows the public sector to understand what the market is capable of delivering and incorporate that into an evolving market management strategy.

A number of councils use market position statements to provide suppliers with an accurate image and overview of the market. They describe what the future demand for the particular service is likely to be, the current provision from public, private and community, voluntary and social enterprise sector providers, future levels of funding, and often the ideal models that they will support and encourage. As such they are useful in providing a broad picture of the area for suppliers. However, where information is lacking their efficacy is less. If a council is aware of the gaps in its market knowledge, before they produce their market position statement they will need to work with potential suppliers and local public sector bodies to build this up.

Need

Where significant investment is required to transform and update a service and there is limited capacity within existing providers, market managers should consider a wider range of potential sources of new ideas and participation.

Problem

Public sector commercial teams rely on domestic suppliers having the capacity and the commercial strategies that support significant investment in UK public sector markets. Where this is not available, public sector managers risk having to limit the scope of their service transformation plans.

Solution

Overseas suppliers can provide additional competition in a market dominated by a small number of suppliers. While an OJEU notice will make a contract open to bidders across the EU, for some contracts it may be helpful to actively seek out potential contracts and encourage them into the market. This can be achieved through closer cross-department working with UKTI and BIS to identify pools of overseas market knowledge and expertise, applicable to the service design question under consideration, and establish routes to encourage interest in further exploring particular UK public sector markets

Need

Contracts that are commercially attractive to encourage bids from as wide a scope of suppliers as is appropriate to the market.

Problem

Contract models that meet precisely the public sector's service needs, but fail to prove commercially attractive to a broad range of suppliers, will not encourage the market to invest in challenging new approaches and leave customers will a smaller choice of suppliers.

Solution

Ensuring new suppliers enter a market, where no obvious market entry barriers exist, means increasing the commercial value of the contract and the prospect of a reasonable return from any investment. From a supplier's perspective, the attractiveness of a market is determined by a range of factors, including prospects of a reasonable return on investment; market stability; existence of a pipeline of opportunities and stability of likely demand. Reviewing existing contracts against these factors, and seeking to understand directly from companies why they are not in the market, should ensure that subsequent contracts are commercially attractive to a wider group of suppliers.

The inclusion of performance measures around re-offending, and employment rates of ex-offenders and positive publication of benefits from the procurment would all increase the social value of the contract.

This are of safeguard has been broached around those deemed "hardest to help" and requirements to incentivise support for this group may need to be modified or suppliemented in furture commissioning cycles.

Need

Routes through which potential suppliers not currently offering services in the market can see a long-term commercial opportunity in which they could invest and develop as a potential bidder.

Problem

Where no substantial market offering exists, a new market will only develop when there is a clear prospect for suppliers of what this market will look like and offer.

Solution

Building long-term supplier capacity should be a priority. To attract firms not currently operating in the market and support the creation of new collaborations or joint ventures which could compete, market managers should have in place - and communicate to target potential suppliers - a clear, long-run pipeline of commercial opportunities which sets out the potential scope of the market and the expected outcomes sought from suppliers.