Pre-Contract, Getting off to the Right Start - Robert Breedon - ThinkHouse Public Sector June 2015

Mark Greenburgh: I am joined by Robert Breedon, the head of our public sector health team, to discuss the importance of appropriate market engagement before embarking on a public procurement exercise.

Robert, what is prior market engagement and why is it so important?

Robert Breedon: Prior market engagement is the process by which a customer who is thinking about going out to public procurement engages with the market place, so it's preparing itself for the procurement and market testing essentially, asking the market place is what I'm looking for, is it capable of being delivered, are you up for being able to deliver that?

And so you are able to frame the tender and the opportunity in a way that is more aligned to the market place's offering and that's a benefit for both the customer and the suppliers and, from the supplier's perspective, it's an opportunity for them to be able to influence the thinking at a very early stage.

Mark: And what benefits does it provide?

Robert: For the customer it allows them to test whether the service or the goods that they are looking for can be delivered by the market. So, to be able to answer questions such as, is this feasible, is there capacity in the market, is there sufficient competition to generate interest in the services and the goods that have been sought after?

From the supplier's perspective, again it allows them to engage in the dialogue, to be able to advise the customers about how technology may have moved on, how services are now delivered in a different way so that they can influence the requirements and the scope before it's too late.

Mark: So if a buyer wants to go down that route, how do they manage the procurement risks?

Robert: Well, first of all it's important to understand that this is now expressly provided for in the new regulations, so there's express permission if you like to be able to go out and engage with the market. Secondly, it's usually started with a form of advert, whether that's a European-wide advert known as a prior information notice or a PIN, or possibly a trade or industry journal, so that you are advertising the opportunity and then the key under-procurement rules is that you treat everybody fairly and equally and at the heart of that is really open and transparent communication, so whatever information is being gleaned or imparted you share that with everybody involved.

Mark: Now I have heard about lotting. What is that and what advantages does it bring?

Robert: Lotting is where the opportunity that's being advertised by the customer is divided up into a series of smaller lots and that might be geographical or it might be by service type, and customers are encouraged to think about lotting because it's believed that it encourages the involvement of smaller and medium sized operators.

The smaller the lot the more able they are to bid for that and to be successful in that. So the benefits will be that you are more likely to end up with a range of providers with a different range of offering, different range of service solutions, and by dividing it up into smaller opportunities it's much more likely to be within the capability and the capacity of smaller and medium size enterprises, which we're encouraged to promote under the new regulations.

Mark: And tell us about any disadvantages?

Robert: There's often the concern, if you divide the opportunity up into too many lots, that you lose the potential advantages in the economies of scale that you get with larger opportunities, so that's the other side of the coin if you like from the opportunities for the small and medium sized businesses.

There is also a concern that across different lots might you end up with a different quality of service provision. So if you have a particularly strong provider but you limit their opportunity to win more than a certain number of lots, might you end up with lower quality service provision in those other areas?

And the third area I think is around the implications for contract management with a greater number of lots you physically have a greater number of contracts to manage and with that you have also got the interface issues in terms of managing the provision of the services across different providers.

Mark: What is due diligence and why is it so important?

Robert: In the context of a public procurement due diligence is the process where the customer makes information available to all bidders. Information such as staffing numbers and costs, existing assets that might transfer, importantly what's the current level of performance being achieved.

And you want to make that information as full and as accurate as you can, so that from the supplier's perspective they are able to accurately access the risks and the implications of bidding for the contract. It will allow them to frame and to put forward a much more accurate proposal which has got fewer assumptions within it and so, from the customer's perspective, you are much more likely to get credible realistic bids without levels of assumptions and caveats within it.

Mark: And are there any other considerations to be taken into account before embarking on a procurement process?

Robert: Yes, and some of those considerations are common both to the customer and the supplier. So first of those would be, make sure you've got senior management buy in. It's quite frustrating to find yourself part way through a procurement to find that the senior management are either not aware or are not supporting either the customer's perspective or the supplier's bid.

Secondly, and very importantly, make sure that whether it's the supplier's team or the customer's team that the team has the relevant skills, experience and capacity to deal with the procurement. This is going to take quite a lot of time on both sides, so make sure that the people are freed up and have the relevant expertise to be able to undertake the task that you are asking of them.

And thirdly, I think particularly from a customer's perspective, do you have the budget to be able run and to procure and ultimately pay for the services that you are going to be commissioning?

Mark: So to summarise, what are the key points to remember?

Robert: Both from the customer's perspective and from the supplier's side, take the opportunity to get involved.

Secondly, we know that we are now encouraged to think about, in the case of larger opportunities, how you might divide them up into lots. Think about the benefits, also think about some of the challenges that are involved in that. If a decision is made not to divide up into lots you need to publish your reasons for doing so, so give some careful thought to that.

Thirdly, start the due diligence exercise early and try to put as much information as you can out there for bidders. It improves their prospects of putting forward very strong bids and from a customer's perspective it means you are going to get strong bids without assumptions and caveats.

And finally, from both the supplier and the customer's side, make sure that the teams that you are putting on for the job have both the skills, the expertise but equally the capacity to undertake the task.

Mark: Robert Breedon, thank you very much.