How to Manage Low Value Contracts Effectively

Low-value contracts are public sector tenders that fall below threshold* – the amount at which procurement contracts must be published on digital platforms. The UK government is pushing for more low-value contracts to encourage SMEs to join the public sector and take advantage of government tenders that are far simpler than high-value contracts.

To this end, the UK government spends approximately £379 billion per year on public sector procurement, and has dedicated a third of public money to public procurement

*(Currently (Nov 2023), below threshold for a central government procurement contract is £12,000 and £30,000 for sub-central government contracts.)

There are many reasons for focusing on SMEs, the two biggest being:

1) Small businesses make up over 99% of businesses in the UK. (Start of 2022) That’s a big market waiting to be tapped. 

2) SMEs provide benefits that the big businesses bidding on large high-value contracts can’t provide, including innovation, collaboration, agility, flexibility, and social value.

We’re going to explore low-value tenders to uncover more benefits for government procurement contracts. We’ll also look at some contract management challenges and their solutions.

The Public Sector And Small Businesses Both Benefit

SMEs that venture into public sector procurement enjoy low levels of competition because the majority aren’t aware of all the benefits. Even though low-value government tenders are widely available (according to stats, they comprise more than 70% of the public sector), many SMEs don’t really know how to access these types of procurement contracts. 

It’s no wonder when you discover that there are between 500 and 900 portals for public sector bodies to publish new tender opportunities. 

As a result, the UK Government has come up with important changes to the upcoming Procurement Bill to make it easier to find contracts. The Bill is designed to simplify the bidding process in part by publishing tender notices that are perfect for small businesses. 

For example, tenders don’t need as much supporting information as large contracts, and there is much less red tape, which speeds up the procurement cycle.

Making social value a mandatory factor in assessing and awarding contracts is also a game changer for small businesses. It allows SMEs to prove they can provide greater value for money than some large enterprises. Their flexibility also enables them to adapt social value initiatives far more quickly and easily than big business.

Managing Low-Value Contracts

Low-value contract management is like other types of procurement contracts used in project management. We’re going to look at some of the steps necessary to successfully manage low-value government tenders. 

Contract creation

Contract creation occurs after a needs assessment to identify the services, products, or works required. Relevant departments provide input so contract creators know exactly what they need to include in the tender. 

Once the contents of the contract have been approved, it’s ready to be published on a contracts finder platform, such as Supply2Gov or an e-tendering portal, such as Delta eSourcing.

Bid assessments

Automation software can assess standardised bid templates according to preset criteria. Proposals that make it through this process go on to be evaluated by relevant department heads and procurement managers.

Contracts are awarded to the supplier that provides the most overall value and not necessarily the cheapest price.

Contract awards

Automation software can manage this part of the process too. The software can notify those that win government tenders of their success and forward the relevant local or central government tender documents, which are legally binding, to the winner to complete and return. 

These days, contracts tend to be signed off using e-signature tools.

Contract performance analysis

It’s important to analyse how well suppliers hold up their end of the agreement, but that’s not all. Regular analysis or use of analytics can reveal potential problems with the services early on, giving you time to resolve or negate the problem before it has a chance to disrupt business operations.

Artificial intelligence tools can flag potential problems, as well as send reminders or notifications for certain milestones, like upcoming contract termination. This is important because low-value tenders are short-term – generally a year at most. And, as we know, a year can fly by, so it’s easy to forget about publishing a new contract. A gentle reminder is exactly what you need to go back to your needs assessment.

Entering the contract lifecycle again gives other suppliers a fair shot at winning public sector contracts. 

Essential elements in low-value contract management

The new Procurement Bill dictates that all public sector bodies prioritise the following elements in government contracts:

Visibility & Transparency. 

Contract opportunities are best published on platforms like the government’s Contracts Finder and other portals that provide a single hub designed with visibility and transparency in mind. For instance, suppliers and buyers can both see a contract in its original form plus each amendment to the contract.

Transparency also plays a vital role in government contract audits and assessments. There is a clear audit trail because every interaction is logged, enabling buyers and suppliers to look back and see each step that has been taken – and the result.

The single hub or central platform enables everyone involved to obtain certain data, like product, service, or work delivery – was it on time, was the quality good, did the costs remain the same, etc.

Compliance

Compliance in contract management works on two levels. 

1) Compliance with the contract agreement; delivering on all promises, including deadlines, responsibilities, and quality standards. 

2) Compliance with the new regulations in government contracts; non-discrimination, health and safety in the workplace, and fairness in awarding contracts.

Risk Assessment & Management 

It’s important to conduct a thorough risk assessment not only of potential suppliers but also everyone who plays a role in meeting all the terms and conditions in the contract. Even those who are only indirectly involved in different sectors. 

We realise that you can’t cover every step in the supply chain. That’s why you need to include a comprehensive risk management strategy when creating your overarching management strategy. 

Relationship Building & Nurturing

Good relationships with suppliers are built on transparency, trust, communication, and shared goals and work ethic. All of which can lead to improved quality of products, services, and works, as well as reduced costs and the ability to work through problems and reach mutually satisfactory solutions.

Communication Management 

Open communication channels are essential in government tenders. Miscommunication is not only easy when it comes to the legalese in contracts, but it can also have devastating effects. Communication works both ways, so public sector bodies and suppliers must be able to clarify things like who specifically is responsible for what, specifically.

Establish a Contract Management Framework.

There are many benefits to having frameworks in procurement. The biggest benefit is that frameworks operate like a limited supplier pool. Only certain suppliers who can potentially meet all the project’s needs are included. This makes it far easier and quicker for buyers to assess relevant suppliers and award a contract. 

Power Behind Low-Value Contracts

As we’ve said, the government is pushing for more SMEs to enter the public sector for mutually beneficial growth, collaboration, and innovation. This is evident in its willingness to spend billions of pounds on public contracts.

We’ve also seen that it’s necessary to make these tenders visible and accessible. The government is doing its bit by putting its weight into Contracts Finder, its platform for buyers to publish contract opportunities.

However, there are many, many more platforms and portals that are also purpose-built to deliver tender alerts to suppliers, especially those that are new to the public sector. 

Delta eSourcing is a digital portal that simplifies procurement for both parties in public sector procurement. You get support and guidance through all the processes from publishing tenders to analytics. Discover how Delta eSourcing can boost your business. Book a free demo now.

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