Increasing use of Dynamic Purchasing Systems (DPS) could mean the end of frameworks in public procurement. But is there empirical evidence supporting the benefits of these systems?
In the first part of this series, we discussed the benefits and drawbacks of Dynamic Purchasing Systems for public procurement. Some of the benefits discussed were:
- Increased Competition and Competitive Pricing
- Spreading and Minimising Risk
- Bridging the Talent Gap
But what is the evidence for these benefits? And will this help to lead to an increased use of Dynamic Purchasing Systems in public procurement?
Research published by PwC in 2011 provides some empirical evidence regarding the use of Dynamic Purchasing Systems in the EU. At this time only 1.1 per cent of procedures were DPS, with the greatest use being in Greece and the Czech Republic. Where there was joint purchasing, DPS was used less and this could be one reason why take up in the UK has been low as there has been a focus on collaborative purchasing arrangements across the public sector.
Looking at the recent contract notices (including PIN’s) on Sell 2 Wales, Contracts Finder and Public Contracts Scotland, there is evidence that Dynamic Purchasing Systems are currently being used across the public sector to source a wide range of goods, services and works. From this crude research by far the most popular category to apply a DPS to is transport with the majority of these contracts being for home to school transport.
Transport accounted for 34 per cent of the DPS contracts that were found on the above mentioned sites. Other categories where there were several DPS contracts in place included Care (12 per cent) and works/maintenance (12 per cent).
From the research it was clear that DPS is more widely used in England than in Wales and Scotland. Only 4 of the 65 contracts found were in Scotland and Wales. Possibly devolution and the application of national purchasing policies which often promote collaborative purchasing has affected this.
There was evidence of the DPS being used across the various types of public sector organisations including central government departments, local authorities, housing associations and colleges. It was the local authorities that accounted for the majority of the DPS’s that were in place, this could possibly be due to their responsibility to provide the home to school transport that made up over a third of these contracts.
From the research conducted there were no examples found within the NHS, this could possibly be due to the low number of suppliers available for some specialised products.
Industry Case Studies
Two case studies give us a more in-depth look at the use of DPS. Local Authority 1 (LA1) had set up one DPS contract for home to school transport for children. Local Authority 2 (LA2) had set up three DPS contracts, the results here focused on the health services DPS. Both Authorities stated that greater access to new suppliers and allowing suppliers to enter the system at any time were the main reasons they had used the DPS.
This was particularly important to LA2, as the contract was for the purchase of a new category area, for which new suppliers regularly entered the market. For LA1 increased competition in the market was the driving force and an increased number of suppliers would help to achieve this.
Disadvantages stated by LA1 included the need for extensive training for buyers and the market place as well as the need to resolve IT issues quickly. On a similar note LA2 stated that the resource intensive nature of dynamic purchasing systems was a downside.
Both stated that they would consider using DPS again in the future; indeed LA2 already had more than one live DPS. LA1 noted that DPS is now considered as part of their category management approach and that the changes to the procurement regulations had assisted in this. LA2 considered dynamic purchasing systems to be a valuable procurement option.
It is difficult to tell if there has been an increase in the use of DPS since the regulations changed. All of the contracts that were found during the research process were procured after 2011 when the PWC research was published and this research only covers the UK. An analysis of the number of new DPS contracts advertised in the ten weeks before the regulation changes was compared with the number in the ten weeks after the changes.
In the ten weeks before there were eight new contracts advertised but in the ten weeks after there were thirteen. This does suggest that there could be an increase in the use of the DPS however it is very early days. What it does show however is an appetite amongst public sector professionals to use this type of procurement vehicle.
The practise of adding or removing suppliers to a framework is not a stranger to our private sector colleagues. However, frameworks are entrenched in the culture of public sector purchasing and, more recently, the collaborative procurement vehicles that have sprung up. In terms of the affect of the new regulations, it is still very early days and so it is difficult to tell whether the changes will drive an increase in the use of DPS.
The benefits of using a dynamic purchasing system appear to far out weigh the disadvantages, if applied to a suitable category of spend. These tangible benefits could very well pave the way for Dynamic Purchasing Systems to begin to form a more prominent role in public sector purchasing strategy.