The Crown Commercial Service ("CCS") has released guidance to government departments after some suppliers had reported that procurements were being conducted in ways that result in "disproportionate or inappropriate risk transfer". There has also been criticism that onerous requirements are "stifling innovation" and are leading to increased costs.
The guidance must be implemented immediately and applies to:
- All Central Government Departments
- Their Executive Agencies
- Non Departmental Public Bodies
(collectively referred to as "Organisations").
The CCS has stated that the following matters (in addition to matters considered in previous guidance notes) are seen as best practice when Organisations conduct procurements:
- Conduct effective pre-market engagement
Pre-procurement engagement with the market (including potential suppliers) is now expressly permitted under procurement law. Engaging with the market is "essential good practice, helps to maximise value and encourage appropriate innovation".
- Ensure accurate and reliable data
Accurate and reliable data should be made available to suppliers both during a procurement process and throughout the contract period, particularly where it is necessary to manage demand and performance. Poor quality data can "disproportionately affect risk transfer in the contract".
- Award contracts on the basis of value for money
Value for money is the "best mix of quality and effectiveness for the least outlay over the period of the use of the goods or services bought".
- Put in place appropriate mechanisms for identifying and managing risks
Organisations should be careful to avoid putting in place a "blanket approach" and should carefully consider the risks contained in the contract and discuss any such risks with the suppliers pre-procurement. The approach taken by Organisations should be proportionate.
- Establish limits of liability
Organisations should consider:
- The commercial risks of each contract and the proposed approach for managing such risks
- Discussing proposals for managing risk with potential suppliers. This should form part of the early dialogue with potential suppliers before the procurement begins
- Tailoring liability provisions relative to the requirement, the contract value and complexity. Organisations should avoid unlimited liability provisions unless they can be justified commercially or are required by law
- Using Deeds of Guarantee and Performance Bonds only in specific and limited circumstances where the contract is deemed to be high risk.
Adopt a collaborative approach to managing change
- Organisations should work with the supplier early enough to resolve issues such as quality of service delivery, volumes, performance requirements or key performance indicators without creating unmanageable or unnecessary risks for either party.
It is interesting that the CCS has seen the need to formally state what is already procurement good practice. The CCS is attempting to further encourage collaboration between suppliers, in particular SMEs, and Organisations to ensure that the contract represents good value for money for Organisations, whilst ensuring that suppliers are not unnecessarily burdened.
Article written by Liz Gibson and Melissa King.