In Part 1 of this briefing we discussed the government’s strategic priorities for public procurement, and here in Part 2 we’re going to consider the government’s policy on ‘Commercial and Procurement Delivery’ and ‘Skills and Capability for Procurement’.
Commercial and Procurement Delivery
The National Procurement Policy Statement (NPPS) states that “All contracting authorities should consider whether they have the right policies and processes in place to manage the key stages of commercial delivery identified in this statement, where they are relevant to their procurement portfolio.”
These policies and processes are promoted as something to support not just social value but also value for money. All contracting authorities should have processes and governance to support compliant procurements that proportionately deal with their complexity, cost and risk.
Public sector bodies are constantly being asked to do more with less, with some of that ‘more’ being the social value priorities set out in the NPPS.
It is therefore good to see value for money being mentioned alongside the other objectives in both the NPPS and the Procurement Bill.
Contracting authorities should consider the following:
- Publication of procurement pipelines: Contracting authorities should publish annual pipelines of their planned procurements and commercial activity, looking forward at least 18 months but ideally three to five years.
- Market health and capability assessments: Projects should undertake market assessments to determine the health of the relevant market and consider how the commercial strategy and contract design could be set to address potential market weaknesses.
- Project validation review: Complex outsourcing projects should go through an independent review prior to any public commitment being made in order to benefit from cross-sector expertise to assure deliverability, affordability and value for money.
- Delivery model assessments (also known as Make versus Buy): Contracting authorities should conduct a proportionate delivery model assessment before deciding whether to outsource, insource or re-procure a service through evidence-based analysis.
- Should cost model: Complex projects should produce a Should Cost Model as part of the Delivery Model Assessment to estimate the total cost of delivering the service and protect the contracting authority from low bid bias.
- Pilots: Pilots should be used where a service is being outsourced for the first time. Piloting a service delivery model is the best way to understand the environment, constraints, requirements, risks and opportunities.
- Key performance indicators: New projects should include performance measures that are relevant to the service objective and proportionate to the size and complexity of the contract.
- Risk allocation: Risk allocation should be subject to scrutiny prior to going to market, with meaningful market engagement.
- Pricing and payment mechanism: The approach to pricing and payment goes hand in hand with risk allocation and should similarly be subject to consideration and scrutiny to ensure it incentivises the desired behaviours or outcomes.
- Assessing the economic and financial standing of suppliers: Outsourcing projects should include a proportionate assessment of the risk of a supplier going out of business during the life of a contract.
- Resolution planning: Suppliers of contracts which the contracting authority considers as critical service contracts to the public sector should provide corporate resolution planning information so that the contracting authority is prepared for any risk to the continuity of service delivery posed by insolvency.
The NPPS states that contracting authorities should also be alive to issues in their supply chains around modern slavery and seek to improve labour standards where these are not acceptable.
The benefit of procurement collaboration between public bodies is promoted as, when set up correctly, this can deliver a variety of benefits such as increased value for money.
Skills and Capability for Procurement
The above ‘Commercial and Procurement Delivery’ section of the NPPS requires contracting authorities to consider whether or not their current ‘policies and processes’ are sufficient to deliver the NPPS national priority outcomes, while the final part of the NPPS covers ‘Skills and Capability for Procurement’ which complement these.
Having enough people with the right qualifications and experience is not easy, especially as procurement is not as visible as some other professions.
Many of the procurers I’ve met over the years have fallen into procurement by accident (a happy accident of course) and they don’t automatically start with the qualifications or experience required to run compliant and effective procurements.
There should be a balance of value for money and social value in public procurement and procurers require the knowledge and skills to be able to factor these in without distorting competition or reducing value for money.
This is likely why the NPPS states that contracting authorities “should consider whether they have the right organisational capability and capacity with regard to the procurement skills and resources required to deliver value for money”.
The NPPS suggests that public bodies should benchmark their procurement and commercial capability, and suggests contracting authorities use resources such as the Commercial Continuous Improvement Assessment Framework produced by the Government Commercial Function with NHS England and NHS Improvement, and the National Procurement Strategy Toolkit produced by the Local Government Association.
As part of this benchmarking, contracting authorities should consider:
- “whether commercial objectives are aligned to relevant policies and organisational objectives;
- whether governance, management frameworks and controls are integrated, proportionate and appropriate to the commercial work and level of prevailing risk;
- whether work is undertaken and assigned to people who have the required capability and capacity to undertake it;
- whether business needs are adequately informed by the commercial strategy to determine when, and how to procure services and works;
- whether market conditions are sufficiently understood and procurement routes align with supply capacity and capability;
- whether contract management capability is sufficient and resources are proportional to complexity and risk; and
- whether appropriate procurement systems and data reporting enables process efficiency, robust controls and effective decision making.”
The NPPS states that “where contracting authorities identify gaps in their capability, they should plan now how to fill these”. This could be through:
- developing their own team’s capacity and capability,
- collaboration with other contracting authorities, or
- making use of shared services and professional buying organisations.
The changes proposed in the Transforming Procurement Green Paper and set out in the Procurement Bill are designed to better fit public procurement to the needs of contracting authorities in the UK.
However, to benefit from this greater regulatory simplicity and freedom, public bodies must have the capability and capacity to design and run compliant and effective procurement processes once the current procedural conformity imposed by the PCR 2015 is removed.
A good example of this is the reduction in the available procurement procedures from seven to three, with the Competitive Flexible Procedure replacing five of the current procedures.
It may be the case that procurers will in some cases run their procurements by using structures similar to those under the PCR 2015, or pragmatic combinations of parts of different procedures.
What is certain is that the Procurement Objectives (the proposed update to the Procurement Principles) will have a greater role as guidelines for this and other parts of the new Procurement Bill.
We are publishing a range of other briefings and blogs, covering topics such as Open Frameworks, Changes to the Challenge Process, Reserving Below Threshold Contracts and Changes to Standstill.
Find further procurement reform comment and insight at www.procurementreform.co.uk.
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While all information provided is given in good faith, the contents of these articles are not to be construed as legal advice or a substitute for such advice, which you should obtain from your legal advisors if required. We are not and shall not be held responsible for anything done or not done by you as a result of the information provided.
