Cutting the Cost of Public Sector Procurement

Alex Wakefield
The UK public sector procurement process is the most expensive in the European Union, according to research conducted by the Centre for Economics and Business Research (CEBR).

The CEBR's study found that procurement processes in the UK incur the highest combined costs to public sector bodies looking to attract bids, and private sector suppliers bidding to win contracts.

UK Public Procurement Costs Highest in EU

A competitive procurement process following a full EU procedure costs an average of £45,200, with £8,000 of those costs borne by the public sector employer. This compares to an EU average cost of £23,900, making UK public sector procurement processes 90 per cent more expensive than the EU mean. The CEBR research also showed that the UK also has one of the longest public sector purchasing processes, 53 days longer than the EU average and 20 days longer than Italy, the next longest. As the public sector, at both national and local level, forms the construction industry’s largest client, accounting for nearly 40 per cent of the country’s construction spending, this could result in considerable time and cost implications for our industry.

 

Increasing Costs

The financial thresholds for public sector procurement, the latest of which came into effect on 1st January 2016 and are set to be in place until the end of 2017* mean that buying organisations must advertise any requirement over the new thresholds in the Official Journal of the European Union (OJEU), rather than just advertising it nationally. While this time around the thresholds have been increased in Euros, the equivalent sterling value has decreased because of conversion rates. For UK buyers, this means that they now must publish more of their requirements, rather than less in the OJEU. This leads to more of a burden on UK buyers as they must adhere to stricter and more bureaucratic rules.

The use of framework agreements is often viewed as an efficient way of addressing these issues and there has been a steady increase in their utilisation in recent years.

Benefits of Framework Agreements

The use of framework agreements is often viewed as an efficient way of addressing these issues and there has been a steady increase in their utilisation in recent years. Collaborative frameworks offer a range of benefits:

  • Provides an opportunity to share information and expertise
  • Encourages more integrated working
  • Provides early engagement, generating direction and efficiency
  • Supports local economies through SMEs
  • Promotes community engagement and social economic investment
  • Develops efficient standardised processes
  • Improves services and buildability – reduced risk and better-quality product

Competition

There is a perception in the public sector that competition always equals value for money, resulting in the justification for a competitive tendering process every time. However, it need not be a separate competition every time, especially when there is a repeat of project requirements/desired outcomes. An established framework agreement already approved in a two-stage OJEU procurement process helps to reduce unnecessary time and cost in running further OJEU procurement exercises.

National Frameworks

Faithful+Gould has been working with the public sector in the UK for over 70 years and are suppliers on several national, regional and local frameworks, all designed to bring efficiency and cost savings to the client. With OJEU tendering procedures already completed, they avoid time-consuming and costly procurement processes, bringing time, cost and quality benefits.

An established framework agreement already approved in a two-stage OJEU procurement process helps to reduce unnecessary time and cost...

Research we have conducted on typical procurement timescales for procurement routes available to our public-sector clients has shown that a restricted OJEU on average takes 25 weeks before the delivery stage is reached, this compares to an average of just under four weeks across our various public-sector frameworks, a saving of some five months.

This reduction in precontract time reduces costs to both client and supplier and helps to ensure that commissions are delivered quickly and efficiently once financial approval has been given. National frameworks also give smaller clients the opportunity to derive the same benefits from frameworks as those with more substantial requirements.

Two examples of national frameworks which we have recently been appointed on are the Pagabo Professional Services Framework and the Crown Commercial Services Framework.

Pagabo Professional Services in Construction and Premises Framework

The Pagabo Framework is a fully OJEU compliant framework that enables all public sector clients to appoint consultants to support them in the delivery of construction and built asset related services. Faithful+Gould has been appointed to Lot 1 of the framework which enables us to deliver all framework services throughout the UK as a direct appointment for single or multidisciplinary services.

Crown Commercial Services (CCS) Framework (RM 3741)

Faithful+Gould are suppliers on the CCS Framework for Project Management and Full Design Team Services. The framework, let by the procurement arm of Central Government, provides an excellent route to market for public sector clients and allows Faithful+Gould to be appointed via further competition or direct appointment.

With public sector bodies being put under ever increasing pressure to deliver more with diminishing budgets whilst maintaining front line services and quality of delivery, suitable procurement solutions must be used where possible. By utilising appropriate OJEU compliant competitive and collaborative framework agreements, public sector organisations can procure construction related professional services in a managed, flexible and efficient manner, helping to reduce costs and pre-contract lead times.

* The current threshold for design services for Central Government is set at €135,000/£106,047

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