Monday, 14 December 2015

On 'Lots' within a sourcing strategy.

Peter Smith posted an interesting post a few days ago on 'Lots' (breaking up potential contracts into smaller packages). His post was a follow-up to a previous discussion on the EUs strong steer that, in their view, 'lots' should be the default strategy when letting contracts.

I have advocated the use of 'lots' for many years but that has always been as a tool in achieving the strategic objectives of the organisation, for example, ease of access to SMEs.  If 'lots' are not strategically aligned with the organisation's objectives then, to me, they should not be used.

'Lots' are just one of an array of strategic sourcing options which should be considered - they should not, however, be the default option. Nevertheless, the EU now expects public sector procurers to document why 'lots' are not used and therefore implies, they are the option of preference. The implication is that at some stage that documentation will be need to be produced as some sort of discoverable evidence in defence of a professional judgement by the CPO.

Now I am not against a CPO documenting an options appraisal which justified why 'lots' were not used, on the contrary I would like to see more procurement decisions led out in logical argument. However, I feel those documented justifications should be for internal scrutiny and not something which the EU should demand.

I also have concerns of what this could lead to. For example,
could this ultimately lead to a questioning of the acceptability of public sector consortia or indeed the Crown Commercial Service's raison d'être? There is a role for large public sector framework arrangements, even though there is no guarantee they will bring in the best deal for individual buying organisations, they reduce transaction costs. Surely it is logical that if the EU consider 'lots' to be the default choice, are they therefore implying that contracts should also be let at the lowest level on the public sector buying structure, say, local government consortia as opposed to central government behemoth, a district council as opposed to a local government consortia - isn't that an extension of the 'lots' are best philosophy?

Of course, while the EU have come up with this 'preferred strategy' that's not to say they won;t reverse their view. We've been in a similar position before  - I recall the OGC telling us that the Restricted Procedure was the preferred option, and only a few years later, in their latest incarnation, 'mudding the waters' by contradicting that stance.

Peter also set out a useful list of the pros and cons of Lots  inviting suggestions as to whether or not that could be added to.  So here's a couple of suggestions;

  1. 'Lots' can be used for benchmarking - there's no reason why 'lots' need to all be coterminous. If 'lots' are let serially as opposed to concurrently they can be used to provide the intelligence for rise and fall price negotiations;
  2. 'Lots' can be used to stimulate competitive innovation tension -pushing the supply base to bring forward innovative improvements;
  3. 'Lots' can be used as part of the organisation's training and development plan for procurement staff, reducing the risk of learning on a single large contract;
  4. 'Lots' can be used as part of a supplier development and supplier engagement strategy, making use of waves'. 
So, in summary, 'Lots' are a strategic option for many reasons, but the option should be the choice of the buying organisation as opposed to mandated by some other body who profess to know best!

(First published as a Guest Post by Spendmatters on 9 November 2015)

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