Winchester Vacancies

Running a smooth procurement process

The public sector is under unprecedented pressure to do more for less. Service transformation and outsourcing remain valid ways to respond to the continued drive for benefits realisation, efficiency gains and the shared services agenda. George Wheeler-Carmichael looks at how to procure a successful project.

There is lots of information out there about running public procurements. But often the problems come from decisions taken very early in the process.

This short guide focuses on the pre-procurement stages and offers some practical tips for procuring a successful project.

What market testing can I do pre-OJEU?

Publishing an OJEU notice marks the formal start of a public procurement exercise. There are many things that can (and should) be done to prepare for the procurement, including market testing. But how far can you go?

There is very little law on this. European procurement rules are silent. The only guidance is in the three general principles of procurement law:

  • equal treatment
  • non-discrimination
  • transparency

As long as market testing is carried out in a way which treats all participants equally, does not discriminate (and this includes inviting a wide range of organisations to participate in the first place) and ensures that the same information is given to all, then there should be no problem.

Top tips

Carefully consider what you want to get from the market testing exercise.

Draw up a list of potential participants, ensuring that you have covered all bases. Check against any supplier lists your organisation holds and consult internally to make sure that you have included a range of suppliers, both in terms of size and disciplines.

Plan your market testing exercise carefully, including how you will carry out the exercise.

Consider what background information you will provide to participants.

When you are market testing, always bear in mind the general principles of equality, nondiscrimination and transparency. If you feel that participants are trying a hard sell, rein them in and re-focus attention on what you want to get out of the exercise.

Avoid moving from “testing” the market into having your requirements driven by one or more suggested approach or solution. This can only lead to allegations of unequal or unfair treatment or a skewed procurement process.

Once the market testing exercise has finished, consider whether you have achieved your objectives. Are you now ready to go to market or do you need to do some further work? When you do go to market, make sure you notify all those who participated in the market testing exercise once the OJEU notice has been published (but not before).

How can I work with others to procure shared services?

Joint procurement is the most efficient way to work with others to procure a shared service. In other words, you jointly develop your requirements and then publish an OJEU notice which names all parties as “contracting authorities”. In this way, there can be no argument that you were unclear about who is procuring and what they are procuring (the two key factors which tend to lead to procurement risk).

It is critical to correctly scope the services being procured. Allow for flexibility in areas where firm decisions have not yet been made (e.g. whether a service is in or out) or where things may change during the procurement (e.g. if you know an existing contract is due to expire and the services may be brought within scope).

Do this by:

  • including an accurate yet flexible description of services with terminology such as “including but not limited to”
  • using broad CPV codes (common procurement vocabulary codes – the service description codes which must be listed in a notice)
  • giving a minimum and maximum range of contract values (but this must be a genuine estimate)
  • allowing for alternative options, e.g. relating to the length of the contract term.

The OJEU notice must describe all services required by all procuring organisations. If the services are not within the scope, it is unlikely that they can be brought in later on.

Which procurement route is the most appropriate?

If you know exactly what you want and can specify your requirements in advance, then the “restricted” procedure may be appropriate. If you want to engage with the market to refine your requirements or there are particular complexities to what you are procuring or how you will receive it, then the “competitive dialogue” procedure may be suitable. You will need to justify use of this procedure by meeting the legal test of a “particularly complex contract”.

Consider the contract structure

For example: whether all procuring organisations will enter into the same single contract with the supplier, or whether each will have a separate contract, whether the services be split into “lots” or whether you anticipate a prime contractor arrangement with sub-contractors delivering specified areas, or a single supplier.

What if I can’t get full commitment from potential sharers of services?

Working with other organisations on a joint procurement is not easy. Organisations’ aims and objectives can diverge as the process develops, or the speed of progress can differ, causing frustrations and potential fall outs. Many joint procurements never leave the starting blocks due to an inability to agree on a way forward.

Lead authorities

You may decide that you want one organisation to take the lead and for the other organisations to “piggy back” on whatever the lead ultimately procures. The danger with this is that the procurement ends up being totally driven by the lead, without enough input from or consultation with the other organisations. The key is to be clear amongst all organisations the basis on which the procurement is to be undertaken and how all parties will feed into it.

Reference to others

You can name other organisations in the OJEU notice without them being involved in the procurement process. It is not uncommon for notices to refer to “other neighbouring local authorities”, “other government departments” or “other public sector bodies including NHS trusts, PCTs, schools and further education institutions”. While this is not wrong, it may be insufficient for another organisation to justify joining the procurement or relying on the contract at a later stage. Here the risk sits with the organisation who may want to benefit in the future.

You may want to allow for flexibility in your OJEU notice for others to share services, but if this is ever to come to fruition the notice really should expressly name those organisations. This does not commit those organisations to anything but will provide them with better justification that they were within the scope of the notice. Having said this, it is generally not advisable to list organisations without first seeking permission!

Can I set up a framework that others could use in the future?

A framework is a call-off arrangement under which you agree the terms on which services can be called off in the future. Procurement law requires the terms of the framework (in particular scope and price) to be set and agreed at the outset. Without clarity of the framework terms, the call-offs themselves could be viewed as separate contracts which need to be separately procured. So the law allows you to call off services without a separate procurement as long as the terms of the framework are not so woolly that it becomes a way of circumventing the rules.

Frameworks can be set up with one or more customers and one or more suppliers. So you could jointly set up a framework with other public bodies, or you could establish the terms of the framework such that others could join in the future. Those joining in the future would be restricted to the terms you set up, so they wouldn’t be able to extend the framework to areas they may want to procure but which you didn’t originally cover.

You may want to consider setting up a framework with a range of suppliers. You could establish a multi-supplier framework, each with their individual specialisms. If only one supplier was capable of meeting your requirements in a particular area then you can call off services directly from that supplier without the need for any further competition. If there is more than one supplier who can meet your requirements, you must hold a mini-competition to establish who can offer the best solution and the best price. The terms of the mini-competition process must be set out in the framework agreement.

The length of a framework agreement must be no longer than four years, unless you can justify exceptional circumstances (which can be difficult). The call-offs made under a framework agreement should not be substantially longer than the term of the framework. For example, you couldn’t award a call off contract lasting 10 years in the fourth year of the framework.

How can joint ventures be used?

Many suppliers are keen to enter into joint venture arrangements with the public sector to provide a vehicle through which shared services can be provided. A corporate vehicle is perceived as a more integrated way of jointly developing and delivering business cases and sharing in savings and efficiencies.

The first thing to consider is whether a joint venture is the best way to deliver your objectives. Is it really necessary to embed yourself with the private sector in a corporate structure, or can the same be achieved through a contract?

Assuming there are some real benefits to a joint venture, you will need to be satisfied that you have the necessary legal power to participate in such an arrangement. There can be complications with certain types of vehicles and future trading with other organisations can given rise to issues.

Setting up a joint venture does not in itself require a procurement exercise. However, the contracts that you will need to enter into with the joint venture vehicle are caught by the procurement rules. There is little point in entering into a joint venture and then not being able to benefit from it because services cannot be provided without a procurement! There is an exemption from the rules for “inhouse” service provision, but this will not usually apply where a third party (the private sector partner) has an interest in the joint venture. A joint venture partner must therefore be procured through an OJEU process.

The terms of the joint venture will be critical to ensure a successful relationship. You will need to wear two hats when negotiating terms, one as joint venture partner and the other as the customer of the joint venture. This tension will continue through the life of the joint venture and conflicts of interest must be recognised and appropriately managed.

The funding and resourcing of the joint venture will need to be agreed up front. Issues to consider include:

  • what level of initial funding will each party contribute?
  • what is the expectation in terms of additional funding that may be required in the future?
  • how will funding be injected – by share capital, loan notes or otherwise?
  • will the joint venture employ its own staff or will employees be seconded from your organisation or the private sector partner?
  • what is the business plan for the joint venture and how will it be regularly updated?
  • how and when will gains (ie profits) be distributed?

It can seem wrong to be talking about exit at the beginning of a venture. However, it is much better to define and agree the exit arrangements before the joint venture is formed to ensure clarity of expectations and responsibilities. For this reason, an exit plan should form part of the joint venture members agreement.

Key advantages of a joint venture

These include:

  • more formal governance arrangements through a board of directors who are responsible for the JV entity
  • a focussed business dedicated to achieving efficiencies which can be translated into actual savings
  • a share in the financial benefits (i.e. profits) generated by the joint venture, through share dividends or profit distributions
  • tax advantages of certain structures – a limited liability partnership, for example, provides tax transparency
  • the ability to roll out a successful business model to other public sector organisations.

George Wheeler-Carmichael is a partner at Nabarro. He can be contacted on 020 7524 6875 or This email address is being protected from spambots. You need JavaScript enabled to view it..