Procurement Act

By Dean Fazackerley, LHC Head of Procurement

In this article we will explore the changes that the Procurement Act makes to frameworks and Dynamic Purchasing Systems (DPS). As you might imagine, this is a topic very close to LHC’s heart and an area we are very keen to understand further following the release of the green paper and consultation.

With the dust settling on the final wording of the act, we know the new regime provides two framework options - closed frameworks and open frameworks.

Closed Frameworks

The closed framework option is essentially what we are all familiar with under the current regime; a framework that opens for competition, one or more bidders are appointed and then the framework is closed for any new submissions for a period of time. The act re-affirms the current guidance that closed frameworks should not be set for longer than four years, unless required due to the nature of the works, services or supplies being procured.

Open Frameworks

The act builds on this model and introduces the open framework option. The new option is described in the act as a series of linked frameworks awarded in succession, but in practice the model functions like a longer term framework which can be re-opened to the market at defined intervals. 

The reported intention behind this new framework is to mitigate some of the challenges and criticisms cited of closed frameworks, i.e. a framework is typically a closed shop for four or more years and an awful lot can happen in that time. This is no more relevant than in the built environment and whilst LHC do extensive pre-market engagement with clients and contractors to future proof our own procurement solutions, broadly, it’s a critique that LHC recognise.

In our sector we have seen a huge amount of change and disruption such as advances in technologies, changes in funding, Brexit, new legislation, Covid-19 and so on. These changes have contributed to a number of companies folding, but also a number of new entrants and diversification for existing organisations.

The open framework has the potential to address these challenges and provide a more dynamic and adaptable framework solution to keep things fresh and relevant. The new open framework option is described in the act as a series of linked frameworks awarded in succession, but in practice functions like a longer term framework which can be re-opened to the market at defined intervals. Open frameworks will be allowed to run for up to eight years provided they are reopened for competition at least once within the first three years, and at least once again within the remaining five years.

The subsequent frameworks must be issued on ‘substantially the same terms’ as the original competitions; something that will no doubt be debated further and tested over the next few years once the act is in place.

This ability to re-open competition and refresh the framework is a positive thing, however, the devil is always in the detail and unfortunately at this stage LHC believe the detail is what’s missing to be able to fully appreciate where the open framework options takes us, as opposed to running a series of traditional (closed frameworks).

To further understand the benefits and challenges, it is useful to breakdown the open framework model into two options, as we think they are two very different considerations:

1. that with a restriction on the number of appointments
2. that a restriction on the number of appointments to the framework

Open frameworks with no limit on appointees

The act states that where no limit is set on the number of suppliers that can be admitted to an open framework, the contracting authority may automatically re-appoint an existing supplier to a subsequent framework in the series based on either:

1. the fact that the supplier has already been awarded a framework under the scheme;
2. a tender relating to an earlier award under the scheme; or
3. a tender relating to the current award

So, LHC’s current understanding is that where there are no restrictions on number of appointees – if a contractor has been successful in securing a place on an open framework at any stage – a contracting authority can allow the supplier to keep its place for the duration of the open framework term without having to re-evaluate its tender. However, an existing supplier will still have the opportunity to update their previous tender submission at each new framework award, presumably to be able to refresh pricing and/or quality submissions so that they are not disadvantaged when compared to the submissions of new bidders joining the framework.

The explanatory notes also confirm that a new framework could be awarded every year during the maximum eight-year open framework term, so for more defined or easily specified goods or services, this could allow an annual pricing refresh and re-open for fresh entrants to keep everything up-to-date.

LHC view this as a the potential positive and a middle ground solution between a closed framework and DPS under the current regime. It addresses both the issue of traditional frameworks not being able to respond as easily to a changing environment and being a ‘closed shop’, and a DPS not having a direct award capability or consideration of pricing (which is often important for our clients to be able to demonstrate value for money to their leadership teams).

We do foresee some challenges to overcome, not least how a contracting authority assesses an existing bid to a new entrant or an updated submission if any changes (even minor ones) are made to the quality or pricing criteria. Surely this would force all bidders to have to update their submission?

Additionally where ranking is applied to the framework, we believe many existing appointees would likely want to refresh their previous submission to improve their offering, both to ensure it maintains or improves their ranking and also their chances of being awarded a call-off contract. This creates further work initially for the appointee and for the authority in evaluation effort.

Lastly, for the contracting authority there is the challenge of maintaining consistency when re-opening competition. All organisations see changes in staff, and so maintaining fairness and consistency when comparing bids submitted in previous iterations of the framework against new or refreshed bids will require clear evaluation criteria and assessment guidance, particularly where  different staff are being engaged in evaluation at difference stages.

Open frameworks with a limit on appointees

When there is a limit to the number of appointees to the open framework, the mental gymnastics comes into play!

LHC’s current understanding is where an open framework does limit the number of suppliers, an existing supplier can only be reappointed based on its existing tender submission or a new submission. Whichever submission is relied upon, it would need to be re-evaluated by the contracting authority against others (both existing and new) to determine which suppliers will stay on or join the framework for the next iteration.

This appears to create a situation where – given the limited number of spaces – all bidders will need to update their submission in order to give them the best possible chance of remaining on the framework. It they don’t, they run the risk of their previous submission (which may be a number of years old at that point) being compared against more up-to-date submissions that should reflect newer technologies and practices and would therefore be more compelling and attuned to the desired outcomes of the framework.

Whether this option provides any benefit over a traditional, closed option remains to be seen and this will be an area where, at LHC, we hope to see further clarification from government.

In Summary

It’s positive that the Government has listened and responded to the challenges identified about both frameworks and DPS, and have provided solutions to potentially address these challenges. The open framework model has the capability to be a very positive tool on a contracting authority’s belt, but some further advice, thinking and testing is required to fully understand how to leverage these benefits without tripping up and creating unintended consequences, or creating a convoluted assessment process that the benefits fall away.

With the introduction of the open framework model, it’s easy to forget the ‘old faithful’ closed framework option, which as we transition to the new regime, should not be discounted. There is an argument to be made where ‘if it’s not broken don’t fix it’, and the benefits of clarity and simplicity should not be overlooked where it is deemed unsuitable for your needs. As ever, it’s not a one size fits all approach and careful thought as to the most pragmatic and practical procurement solution to deliver the desired outcomes should drive which framework option is chosen.