Public procurement (also government procurement) has come a long way since spreadsheets and journals. First, procurement processes went digital, with procurement management software that saved contracting authorities an enormous amount of time and money.
Then the cloud came along and with it new contract award decision-making thanks to eSourcing, eProcurement, eTendering, and eAuctions. The benefits for public sector buyers were myriad.
Throughout, the market was perceived as being out of reach of SMEs. However, given that 90% of businesses in the UK are SMEs, the UK government decided to do something to encourage them to enter the public sector and boost economic growth.
It created a Procurement Bill with procurement legislation specifically to make the public sector easier – and more profitable – for SMEs to compete as public sector buyers.
Enter modern procurement. It streamlines the procurement process, increasing efficiency and cost savings, improving supplier engagement and collaboration, and really embracing the principles of transparency and social value in public services.
In this article, we’re going to look at modern public sector procurement to suss out its methods and benefits for government procurement.
What Is Modern Procurement?
Modern procurement shaves some of the public sector’s rough edges to streamline the procurement process from end to end. Almost everything in the current public procurement process gets a boost, including strategic sourcing, customer satisfaction, and sustainability.
Modern procurement benefits don’t come easily
However, benefits don’t just fall into your lap. You have to work hard within the bounds of the Procurement Act to reap the rewards and the best way to do that is to follow these tips.
1) Create a strategy
Like a GPS for procurement, your public procurement strategy points out the best route, possible challenges, financial risks, and upcoming opportunities.
The public contracts regulations contained in the Procurement Bill emphasise value for money when developing strategies for public contracts, and not just price.
Basically, the new national legislation ensures potential value is considered in all decisions and actions related to public procurement in the UK’s government departments.
For example, is it worthwhile to take advantage of opportunities that only yield benefits down the line? Will the estimated value justify the immediate expense?
2) Identify promising suppliers
If you’ve been using framework agreements, you already have a pre-approved supplier pool and can identify suppliers who best suit the contracts awarded. This is also true if you use a Dynamic Purchasing System (DPS).
One of the great things about modern public procurement is the increasingly advanced automation software. Some software can evaluate proposals, identify bids that meet the criteria published by the public authority, and create a shortlist of suppliers.
3) Select suppliers
With a shortlist ready for you, you can award contracts to suppliers who provide the most value for money.
As a public authority, research is essential to ensure the integrity of potential suppliers. Look for testimonials and case studies, go through websites, read blogs, and see if they use other media to demonstrate industry expertise.
Consult relevant public procurement stakeholders to ensure suppliers meet the brief. For example, is the tender manager happy that the proposal meets procurement legislation and EU rules? Is a key decision maker satisfied that bidders have the skills and resources to deliver the public procurement contract on time?
4) Prioritise MEAT
We briefly mentioned value, now we’re going to take a deeper look at its role in compliance with modern public procurement rules.
Value is important in contract negotiation because the procurement process looks further than pounds and pence. The Procurement Bill shifts focus from the lowest price to the most valuable or most economically advantageous tender (MEAT).
MEAT is what opens the public procurement process to SMEs. If they can provide more value for money (including social value) than larger businesses, they get equal treatment from the relevant contracting authority and are given a chance to win public contracts.
5) Awarding the contract
The contract has been published. Proposals have been evaluated. Value has been weighed and MEAT has been determined.
Automation software can notify contract award winners and send them the legal documentation they need to complete and sign (digitally) to make the contract binding.
Making Modern Procurement Work
You need strategies to make modern public procurement work, but that’s not all. You also need some government procurement-specific tools and technology.
Optimise your public procurement strategy
Think of it as bringing your procurement processes into line. You can optimise your strategy by:
Identifying opportunities for improvement
This isn’t about identifying weak spots in your public procurement strategy.
Instead, it’s about looking for opportunities in the public sector that are ripe for optimisation.
For example:
Your supplier missed a deadline due to stock shortages. Can you work with the supplier to ensure that doesn’t happen again? For example, hold a workshop on the importance of contingency plans and diversifying resources.
A collaborative approach to resolving challenges proactively can also strengthen supplier relationships.
Analysing current procurement processes
Procurement analysis is essentially a performance review that should be done at least once a quarter.
See where you stand by asking questions like, “Are suppliers adhering to EU procurement directives? Are you still on the path to healthy future procurement relationships?”
Be honest at this critical juncture of the public procurement process. Don’t rose-tint your answers to make them fit central government procurement rules.
End the analysis in a meeting with stakeholders and key decision-makers to go over the findings and propose a way forward. Use analytics to support the proposal with in-depth insights and encourage communication about how to drive innovation and economic growth.
Implement changes
The next step is to implement changes identified in the analysis meeting. For example, rewriting the contract notice. You might need to change the format or trim details to make your public contracts easier to understand.
Look at where you publish contract notices. Perhaps you need to be more selective when choosing a portal or platform for publishing public contracts.
Get your strategy off the ground
Now is the time to put public procurement plans into action. Enlist the help of a specialist public sector marketing agency if necessary. They’ll take the pressure off your staff by implementing the strategy to your best advantage and ensure that analytics are properly set up so you can take one final, crucial, step in the procurement process.
Measure the success of your strategy, especially how it acts in the public interest and supports modern public sector procurement methods.
Measure, evaluate, and adapt
It’s essential to run your strategy through analytics.
Basic Google Analytics is fairly easy for beginners and the not-digitally-technically-minded. However, for better insights into the performance of your procurement procedures and the resulting impact on your economic and financial standing, you should consult an expert in the public sector marketplace.
Some public sector agencies have analytics features that enable them to delve deeply into the strategy to identify growth opportunities and provide resolutions or solutions to consider for the next quarter.
Tools and technology
When public sector contracting authorities want to award the most economically advantageous tender, they use two high-tech tools. Both have made technological leaps and been game changers in public sector procurement.
1) Automation
One of the biggest developments in public procurement is automation. An increasing number of contracting authorities are using automation systems to manage time-consuming procurement-related activities, especially ones that are prone to human error.
This enables contracting authorities to improve accuracy, enhance efficiency, generate real-time reports, and make insightful and informed decisions about public services based on sound data.
2) Artificial intelligence and machine learning
Artificial intelligence (AI) and machine learning (ML), like automation, enable public authorities to make smarter, data-driven decisions. Three areas of public procurement benefit from AI and ML.
Predictive analytics
AI boosts predictive analytics software using cutting-edge features that enable more accurate and refined forecasting, including product or service demand and risk analysis.
Contracting authorities can take steps to mitigate local and central government risks, like market research to determine the reason for a potential drop in demand. This insight enables them to avoid or combat the problem.
Supplier risk assessment
Public procurement AI tools play an increasingly important role in supplier risk assessment. They can be invaluable when it comes to performance evaluation, as they analyse central local government data from different angles.
AI can pick up on a variety of supplier-related risks, including financial, political, and environmental (natural disasters) risks.
Now, you can’t stop an earthquake, but you can have contingency plans, for example, backup suppliers who can cover any resulting shortfall.
Contract management
AI and automation work together to analyse and evaluate responses to complex public contracts, such as identifying discrepancies or anomalies. They can also ensure that suppliers are fully compliant with procurement regulations, including relevant secondary legislation in government departments.
What Are The Benefits Of Modern Procurement?
Modern procurement and all its software, tools, and technology, have several advantages for public authorities in the public sector, some of which include:
1) Identification of opportunities up and down the supply chain that result in cost savings, efficient procurement processes, and enhanced supplier engagement across government departments.
2) Greater data collection and accuracy thanks to automation software that facilitates informed decision-making and risk mitigation for central and local authorities.
3) Analytics provide insights that drive cross-functional collaboration, accelerate the procurement cycle, and streamline the supply chain to make processes smoother, more efficient, and more cost-effective.
Strategic Sourcing in Modern Procurement
Strategic sourcing ramps up your supplier sourcing process to provide greater success (and benefits) across the board.
Strategic sourcing can be broken into seven steps.
Step 1
Before you begin planning public contracts, find and include all relevant departments and teams in the public sector organisation. The idea is to create an informed strategic sourcing team that will create and implement a comprehensive strategic sourcing plan that covers government-published contracts and procurement rules.
Step 2
Identify the public contracts’ primary objectives. Overall, a sourcing strategy has several objectives, including increased efficiency, faster speed to market, controlled purchasing costs, and promoting constructive competition.
It’s up to the strategic sourcing team to identify and prioritise objectives before going to the next stage of modern public procurement – market research.
Step 3
Research the public procurement market to determine the total cost of the project, including raw materials, labour, and logistics. Use this as a benchmark to evaluate initial tenders and identify likely suppliers nationally and internationally.
Step 4
Use data to create a contract notice that explicitly states the project’s requirements, criteria and other details like the time frame, central and local government compliance requirements, and organisation-specific procurement rules.
Step 5
Publish the contract notice on a public procurement portal or platform where all contract-related data is stored and interactions recorded.
A good example of a procurement platform is the government’s Contracts Finder, but some public sector specialists provide platforms that publish even more contract notices than the UK government.
The portal should promote transparency and visibility, as well as collaboration and friendly, yet competitive dialogue.
Step 6
Select the supplier that is fit for purpose. Investigate the supplier by following up on references and client testimonials. Assess online presence, especially published content like blog posts, case studies, etc.
Conduct a risk assessment that includes operational, performance, and financial risks.
Evaluate all of the above and weigh them against your criteria and specifications.
Step 7
Notify the winner and provide feedback to all contenders. The UK government has made the feedback process mandatory in the public sector.
Ensure the contract is legally compliant with national law and EU procurement directives. Include items that are particularly relevant for the public sector, like Non-Disclosure Agreements (NDA).
eSourcing In Modern Procurement Methods
eSourcing uses an online portal to identify, collect, evaluate, and compare initial tenders according to preset criteria. In public procurement and public contracts, these include quotes, proposals, and contract negotiations.
It supplies all the information public sector buyers need to kick off the public procurement procedure.
eSourcing is a great tool in modern public procurement methods due to its abilities to:
- Determine contract specs and requirements and issue RFIs, RFPs, and RFQs
- Store documents and facilitate transparent communication
- Pre-qualify suppliers and conduct eAuctions
- Review, analyse, and evaluate tenders and select contract winners
- Create and issue contracts to award winners
- Carry out post-contract evaluation
eAuctions in Modern Procurement Methods
eAuctions are a quick and convenient way for a contracting authority to award contracts to the best supplier. They embrace the transparency principle in public sector procurement and can be used with a variety of procurement processes, including:
- Open and restricted procedures
- Mini-competitions under framework agreements
- Awarding a contract under a dynamic processing system (DPS)
Contracting authorities must clearly state their intention to use this competitive procedure in the contract notice, as well as the rules for the specific type of auction used.
Types of eAuctions
There are four types of eAuctions.
1) Classic reverse auction.
In a classic reverse auction, suppliers submit decreasing bids until the lowest bid wins.
2) Japanese auction
The auction starts at the highest price, which is lowered at intervals determined by the contracting authority. Suppliers opt out when the price is no longer cost-efficient. The last bidder wins the contract.
3) Dutch auction
A Dutch auction also starts at the highest price which is incrementally reduced. The first supplier to bid wins the contract.
4) English auction
An English auction functions like a traditional auction in that the price increases as the auction progresses. Bidders opt-out as the price exceeds their budget. The last bid wins the contract.
Suppliers are evaluated before they’re included in the eAuction. This is because it’s the final stage of the contract award process and public authorities don’t want to research all bidders invited to participate in the auction.
Wrapping Up Modern Procurement In One Powerful Bow
Modern procurement methods give current public procurement a much-needed boost to provide greater, more improved services to contracting authorities.
Some agencies that specialise in the public sector provide a comprehensive range of services. Delta eSourcing, for instance, provides analytics, and tender, supplier, and contract management, as well as eProcurement, eAuctions, and Dynamic Purchasing System management.
Contact us now to find out more about our modern procurement methods or book a free demo to see what our services can do for you.
