Procuring perfect panels

Cutbacks iStock 000013353612XSmall 146x219Putting in place a panel of legal services suppliers is one way in which public sector organisations might control expenditure on legal services; but what does a “perfect” panel look like, and how might an organisation improve its chances of procuring one? Helen Edwards explores the issue.

What is a perfect panel? Each organisation will have a different view of what constitutes a perfect panel, and that is legitimate, because a perfect panel is, essentially, one that is capable of meeting needs in the most cost effective way.

When we talk about a panel of suppliers, this is often used to refer to suppliers on a framework agreement from which an organisation may call-off contracts, but in this context also includes arrangements an authority may  put in place to provide a mix of suppliers to meet different legal needs, for example, combining two or three single supplier contracts, for different areas of legal work.

So, how should an organisation set about the task of procuring a perfect panel?

Defining the organisation’s needs

If the perfect panel is the one most capable of meeting the organisation’s needs, it follows that the starting point must be to define those needs. This is not always straightforward. It is tempting, if the contract is of sufficient size, to assume that a procurement process will be required, and to start designing a tender specification. The process should start with an options appraisal, defining what is actually needed, and producing business case to explore the different possible solutions. There may be an existing framework agreement, which could provide an appropriate level of service at an acceptable cost. It may not be as perfect fit as one designed by the organisation itself, there is a balance, and an assessment should be made of the additional benefits relative to the additional cost of establishing a new panel.

This exercise should be undertaken at an early stage. A rushed procurement process is unlikely to yield the best results, but options may be limited if the decision is left until the last minute. Identifying needs should be factored into the procurement cycle, to allow sufficient time to carry out a considered procurement exercise before any existing contractual arrangements expire.

The specification

If an organisation does need to procure suppliers, it should produce a specification for the contract. It is worth spending time and effort getting this right, giving potential suppliers sufficient information to understand what is needed. It might help to consider pre tender negotiations with the market, so that they are fully aware of the requirements, and can provide valuable information which may help to shape the specification. Although care must be taken in pre tender negotiations, they are permissible under the Public Contracts Regulations 2015, providing the organisation does not engage with any potential supplier to develop the tender to the detriment of other potential suppliers.

The specification should be drafted in a way that is accurate and unambiguous, but it should not be so prescriptive that it discourages innovation. It should state the outputs required, and invite potential suppliers to propose the best way to deliver those outputs.

Consideration should be given as to whether the contract should be divided into Lots, and if so, the best combination of requirements in each Lot. It is permissible not to sub-divide the contract, providing the main reasons for doing so are given.  For legal services, it is usually worthwhile dividing into Lots, unless one supplier is being appointed for a specific area of law. The advantages and disadvantages of sub-division should be balanced. Too many Lots can lead to confusion about which type of work falls into each and too many suppliers, but fewer Lots with wide ranging subject matter may restrict the ability to appoint specialist suppliers unable to service the whole range of work.

Stakeholders should be involved in designing the specification. The appropriate stakeholders will differ, but as a minimum, end users should be involved in designing the specification. One of the reasons most frequently given to me for not wanting to use a panel is that instructing officers do not feel “ownership” of it, and prefer to remain with existing advisers. If savings are to be maximised, it is essential that end users use their panel suppliers. If managers want to encourage or enforce the use of a panel, they should ensure that end users are involved in the process from the outset, and involved in the design of the panel and selection of suppliers.

When designing the specification, attention should be given to how the contract will be managed and monitored once awarded, and the performance standards expected. Standard terms and conditions should be agreed, including an exit strategy. This must be reviewed from a practical standpoint, to consider what problems are likely to arise, and whether any standard legal drafting will give the authority the flexibility to resolve them in its preferred way.

Tender documentation will need to define key criteria on which a decision can be made, and show how that will be measured. Where questions are asked, they should be weighted to reflect their relative importance, and not be chosen to favour a specific supplier. It is worth considering a minimum score for questions of specific value to an organisation, with failure to meet that score resulting in disqualification even if the overall score is respectable. A low score in one question would otherwise not necessarily put a supplier out of the running for the contract award, so minimum scores can be a very useful tool.

A particularly problematic issue is the relative ratio of price to quality. I have heard the argument that, for legal suppliers, quality should be weighted more heavily than price, because people are essentially buying people, and issues such as cultural fit are as important as expert legal knowledge. The counter argument that tends to be favoured by procurement professionals is that these issues can be addressed in the specification. If a specification is well written, and clearly defines what is needed, suppliers who cannot meet it, will be “weeded out”, and the award can be weighted in favour of price. Each organisation will need to decide what best suits its needs for an individual procurement.

The tender process

The services needed, and the value of the contract, will determine whether the Public Contracts Regulations 2015 will apply. Even if they do not, the organisation’s Financial Regulations or Standing Orders should be considered. If the Regulations apply, the organisation needs to select an appropriate tender process. For legal services, this is likely to be either the open procedure, or the restricted procedure.

In the open process any supplier may submit a tender; in the restricted process there is a preliminary vetting stage, based on the economic and financial standing of the supplier, and their technical and professional ability. Organisations need to use the standardised pre-qualification questionnaire (available from Crown Commercial Service), rather than a questionnaire of their own design, and may consider that the pre-vetting permitted by this is of limited value, and instead proceed with an open competition. However, if the organisation expects a lot of interest in the tender, using the restricted procedure does allow it to substantially reduce the number of tenders that it will need to evaluate; the minimum number required by the Regulations to be taken through to tender stage is just five. This has to be balanced against the time taken to evaluate the PQQ responses. The procurement timetable should be designed to encourage the best response, and avoid deadlines that are too tight, or coincide with difficult dates, such as main holiday periods.

The evaluation process

If the restricted procedure is used, there will need to be evaluation at the selection stage, and the award stage. If the open procedure is used, there will only be one evaluation process at award stage. Similar principles apply, although care should be taken that only appropriate questions are asked at each stage; the selection criteria are retrospective, designed to test the economic and financial standing, and technical ability of the bidder. The award criteria are prospective, and should properly assess the bid. The selection criteria should test the bidder; the award criteria should test the bid.

The evaluation of bids is complex, and a crucial factor in achieving the perfect panel. Stakeholders involved in designing the specification should also be involved in the evaluation; a supplier is much more likely to be acceptable to an individual who has been involved and understands the reasons for appointing them. However, it is important that an individual’s personal preferences do not adversely influence the process. To avoid potential challenges, assessments must be undertaken fairly, and must be seen to be fair. Any evaluation should be systematic, objective, and well documented, and having a decent sized team of suitably qualified evaluators substantially improves the robustness of the whole process. Comments made should be capable of justification to the supplier.

Deciding the number of suppliers to appoint to a panel is an important factor in its success. This could be one supplier for one type of work, or a selection of suppliers to provide some choice. Having one supplier tends to keep prices lower, as a supplier with a more predictable income stream is likely to offer greater discounts, but having a wider choice of suppliers encourages ongoing competitiveness, and provides greater flexibility. The appropriate balance will need to be found, but as a word of caution, over large panels should be avoided, as this leads to a greater management burden for the in house team, and potential frustration from suppliers who receive little work. Recent trends have seen both public and private sector organisations reducing the numbers of suppliers on panels when re-procuring.

On-going contract management

Having appointed suppliers, it is important to have robust contract management processes in place. However successful the panel arrangements are initially, things can change over time, especially if they not adequately managed. The organisation should monitor performance, ensure appropriate pricing is being applied, and invest time in building relationships.

It is worth preparing a guide for panel firms, and a user guide, to ensure both parties remain aware of the key points. It is recommended that there are induction sessions with panel suppliers, at the outset, and at a later stage if take up has been slow. If, despite all best efforts, the panel turns out to be less than perfect, this needs to be tackled promptly. Otherwise the anticipated benefits are unlikely to be realised, additional costs may be incurred, and off panel suppliers are likely to be instructed, putting the organisation at risk of breaching procurement regulations.

Before terminating an agreement, or avoiding a particular supplier on a framework, it is worth investing effort into putting the situation right. The following steps may assist:

  • Review the position against the contract – if it is not being followed (e.g. fixed prices are not being honoured), remind everyone of the obligations and monitor compliance;
  • Assess internal behaviours – could they be impacting on performance (e.g. failure to instruct properly, or in a timely manner);
  • Consider whether action is needed to improve / build relationships between key personnel;
  • Consider whether a contract variation could resolve the problem.

Conclusion

It is by no means easy to procure a perfect panel. Most organisations will have some experience of being disappointed with at least some aspects of their panel of legal suppliers. Some might think the “perfect” panel is unachievable, at least at an affordable cost. However, if a perfect panel is simply one that is capable of meeting the organisation’s needs in the most cost effective way, then that is surely a target worth reaching for.

Helen Edwards is Head of the Public Sector Team at Kennedy Cater.

Kennedy Cater works with a wide range of private and public sector clients, managing an aggregate annual external legal spend in excess of £20m. Services include:

  • Spend & Review Services –detailed analysis and identification of sustainable savings and efficiency opportunities
  • Alternative Business Models – business cases and implementation project management
  • Panel Set Up – EU compliant solicitor and barrister frameworks
  • Panel Management – monitoring, analysis and reporting of monthly fees
  • Insourcing – in house team business cases and implementation project management
  • Contract Management – mini tenders and management of complex and large legal services projects
  • Benchmarking – comparing key costs of service delivery with similar organisations.