Ministers publish 'mythbusting factsheet' on talking to suppliers pre-procurement

May 11, 2012

The Cabinet Office has published a policy note – including a 'mythbusting factsheet' – aimed at giving contracting authorities the confidence to talk to suppliers pre-procurement.

The publication also includes a checklist that Whitehall departments, their agencies and non-departmental public bodies (NDPBs) must follow in order to operate the presumption against competitive dialogue “in all but a handful of areas”.

The Cabinet Office said early pre-market engagement enabled contracting authorities to better define their requirements and reduced their reliance on complex procedures.

The factsheet points out that pre-procurement engagement with the market (including talking to potential suppliers) “is not prohibited by EU procurement law, nor is it subject to any detailed procedures provided that it does not prevent an effective competition taking place once the procurement has started”.

It added: “In fact, engaging with the market before starting the formal procurement process is best practice and helps to maximise value for money from the resulting procurement.”

The policy note insisted that both contracting authorities and potential suppliers could benefit from early two-way communication. It set out a number of ‘dos’ and ‘don’ts’ to consider when conducting such engagement.

In this respect, contracting authorities should:

“Engage early and widely with the market to give them an opportunity to shape the requirement and get ready to meet the demand.
Discuss outcomes to inform the specification.
Ensure that suppliers are aware that any resulting procurement will be conducted competitively.
Speak to a proportionate number of potential suppliers in relation to the market size. This will help to ensure that the process is not overburdened by speaking to every conceivable potential supplier.
Maintain the commercial confidentiality of information received during discussions with potential suppliers in line with applicable laws, such as the Freedom of Information Act.
Discuss whether splitting a contract into smaller contracts/lots will stimulate greater competition and deliver better value for money or whether this can be achieved through encouraging a more diverse supply chain.
Discuss with the market how the requirements might be made more exportable overseas – for example, through the use of internationally recognised product standards.
Discuss procurement pipelines with the market and the capabilities needed to deliver them.”

But contracting authorities should not:

“Give any one potential supplier an advantage in bidding over another – for example, by providing one supplier with substantially more information than another – this could be overcome by publishing all information on your website to ensure equal access.
As a result of pre-procurement dialogue shape the requirement in favour of any one particular potential supplier.
Engage in a way that disadvantages any one particular potential supplier or group of potential suppliers – for example, SMEs and mutuals.”

The policy note sets out a number of ways in which contracting authorities can engage with the market pre-procurement. These include: market-sounding exercises (including the use of questionnaires or crowd-sourcing); product surgery; the issue of a prior information note (in accordance with Regulation 11 of the Public Contracts Regulations and Regulation 14 of the Defence and Security Public Contracts Regulations); industry boot camps; and a new online tool called Solutions Exchange, designed to help government buyers engage earlier with potential providers, especially SMEs.

In relation to competitive dialogue, the Cabinet Office said the procedure was designed to be used for particularly complex contracts. “Too often, however, public procurers have relied on it as a means of engaging in dialogue with suppliers, instead of engaging in thorough pre-market engagement to understand the market and supplier offerings prior to going to market,” it claimed.

The policy note said that where Whitehall departments, their agencies and NDPBs wished to use competitive dialogue, they must seek approval from their accounting officers (AOs). AOs may decide to delegate sign-off, but cannot do so below Commercial Director level and will retain ultimate responsibility for each decision to use competitive dialogue.

To sign off the use of competitive dialogue, AOs must satisfy themselves that commercial teams have conducted extensive pre-market engagement with current and potential suppliers in accordance with lean principles, and – as a result of those discussions – they are still unable to use a less complex procurement procedure and must use competitive dialogue.

The Cabinet Office added that AOs should not sign off the use of competitive dialogue if:

Further pre-market engagement would enable the department, Executive Agency or NDPB to better define its requirement and consequently use a less complex procurement procedure.
The requirement is not complex.
Where the procurement is for a Part B service, a procedure that replicates a competitive dialogue should not be endorsed.

The policy note said the competitive dialogue procedure must only be used for particularly complex contracts where after pre-procurement market engagement, the contracting authority is “unable to identify the technical means of delivering its requirement and/or the legal/financial make-up of the project”.

It must not be used where the contracting authority could have established what it wanted to buy through better or more prolonged pre-market engagement.

The Cabinet Office said that projects for which competitive dialogue might still be suitable included those large and complex projects that fall outside the 120 working day commitment. In particular these might include:

Those with an iterative design element, such as construction or economic infrastructure;
Those with a private finance element or other form of public private partnership;
Those that will require some form of planning permission; and
Those where complex commercial arrangements apply, such as joint ventures and mutuals.

An annex to the policy note covers the definition of complex procurements that will not achieve 120 working days (OJEU to award).

The policy note added that the presumption against using the competitive dialogue procedure should not result in greater use of the negotiated procedure, apart from under the Defence and Security Public Contracts Regulations.

The Government said it recognised that there was “already much good practice” in wider public sector procurement and insisted it was not seeking to mandate this approach outside central Government.

“However, Government believes that this new approach will stimulate economic growth and will enable all contracting authorities to achieve better [value for money] through better solutions and more efficient procurement,” it said.

The Government said it wanted to encourage further public sector organisations to include their pipeline data on the Contracts Finder site, and to sign up to its Procurement Pledge.

The presumption against the use of competitive dialogue was announced by Cabinet Office Minister Francis Maude in November 2011.

A copy of the Cabinet Office's procurement policy note can be downloaded here. The note also includes the key principles of the LEAN Sourcing Standard Solution.

Philip Hoult