Tag Archives: dynamic purchasing systems

Dynamic Purchasing Systems – The New Normal?

The framework is dead – long live the framework? As the public sector moves to make collaborative procurement easier, the Dynamic Purchasing System may be the key to long-term planning.

By Andrey Yurlov/ Shutterstock

So you know all about collaborative procurement frameworks in the public sector? Are you planning on using them in the short-term to kick start your year? You might want to hold on a second as there’s something that you might want to try out.

We have touched on collaborative frameworks that are available to public sector organisations in a previous article. Continuing the theme of the difficulties of collaboration, we come to a relatively new beast in the procurement jungle. This is the Dynamic Purchasing System (DPS).

Speaking from experience, it’s one of the hardest exercises I’ve done in my procurement career to date. Not only do you need to have all your stakeholders and requirements lined up before you even start (more on that shortly), but the complexity of the set-up has the ability to leave you scratching your head in utter confusion.

As hard a beast as it is to tame, once it’s in place it has the potential to solve a number of woes commonly associated with frameworks.

Let’s Get Dynamic

There are an increasing number of public sector organisations beginning to use a DPS as an alternative that still bears more than a passing resemblance to traditional frameworks. Buyers still have a list of pre-qualified suppliers who can compete in subsequent tenders, while suppliers can widen their chances by applying for as many Lots as they feel are relevant to their operations.

The key difference is that at the conclusion of the first stage, any suppliers who have been unsuccessful in their application for one or more Lots may reapply. They’ll then be re-evaluated and informed if they have been successful. A kind of ‘wash, rinse, repeat’ situation.

There are standard timelines involved both the first and second stages (see more here) and, unfortunately, it’s not a fast process. If you have never used a DPS, then you might wonder what actually makes it different from your standard frameworks. We’ll cover some Pros and Cons shortly, but in essence there are two key differences.

  1. The length of the DPS – Where a framework may be limited to 3-4 years, there is no upper time limit on a DPS. The buyer would make a decision on an appropriate length, taking into consideration the goods or services being procured, the market and any anticipated changes in scope or market conditions.
  • The ‘open’ application – The DPS is more dynamic than a framework (it’s in the name really!). Suppliers can apply to join at any time during the life of the DPS and are then on it for its duration. This is particularly good if there are new suppliers in the market, but also that unsuccessful suppliers don’t miss out on the chance of business for a number of years.

The Pros – Buyers and Suppliers

Beyond the longer length of the DPS and the fact that suppliers can be added at any time, there are a number of other benefits on both sides of the fence.

  • Reduced Timescales – see, I said we’d get back here! The length of time tenders are out in the market for can be as little as 10 days. This is a major reduction based on the minimum of 25 days for most Restricted procedures. And there’s more…
  • One Notice, No Standstill – Once the first Contract Notice has been sent out, there’s no requirement to do an individual one for each tender. And Award Notices can be grouped over a longer period to be issued in one go. AND there’s no requirement for a 10 day Standstill period on awards. All this means less time and valuable resources being spent on administration.
  • Access for SMEs – the DPS naturally sets up a greater number of smaller Lots and work packages, meaning that it’s much more attractive for SMEs to get involved. It maximises their involvement and means that they are competing on a level playing field with larger organisations.
  • Fully Electronic – further to this, all documentation has to be available in electronic format within the DPS, for its full duration. This means a level playing field again for any suppliers joining later in the process.

The Cons – Is it really for you?

Before we get carried away thinking a DPS is the panacea we’ve all been waiting for, there are a couple of caveats. Some are obvious, others come only with the painful experience of setting one up.

  • No Direct Awards, No Call Offs – unlike a traditional framework, there’s no scope of Direct Award or Call Offs from a DPS. Any procurement projects put through it need to have a full set of tender documents.
  • Set Up Isn’t Easy – as you might expect for something this size, scale and value, the early stages need some hard graft and infinite patience. You’re going to need to have outline specifications, tender documents and T&Cs, as well as a firm idea of what is going through each Lot. Set up alone could take a number of months.
  • No Guarantees – as we found, much to our chagrin, there are no guarantees that the suppliers you want will join. You can lead a horse (or supplier) to water with the notices, emails and follow ups, but they may choose not to drink. After all, from their point of view, they still have significant competition to go through to get any business.
  • It’s not for everything – there are categories and commodities for which a DPS will be brilliant. Markets where there is a fast pace of change or large number of new entrants are good. Commodities with a high volume of transactions, or less complex scope, can greatly benefit. But if you have a highly complex good or service and low number of contracts in your category or commodity, it may not be for you.

The New Normal?

It’s unlikely that Dynamic Purchasing Systems will completely replace traditional frameworks in the future. However, it does provide a powerful and useful tool for buyers both in getting tenders to market and ensuring a good level of on-going competition. Suppliers will benefit from reduced administration too, as they only need to pre-qualify once, but may be put off by the sheer size and scale of the DPS if you have a large number of Lots.

It’s definitely worth looking in more detail at the available information to see if a DPS is for you, and how you would set it up. Make sure you communicate with the market to see if it’s applicable (also good as a heads up that it’s coming) and how the Lots might be split down. Internally, gear everyone up and get everything in place. Once you explain the benefits, people are likely to get on board quickly!

Ultimately, don’t be put off by it. Yes, it’s something completely different that you may never have done before. But then, when’s that ever stopped procurement before?!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

The Evidence Behind Using DPS in Procurement

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?

Eny Setiyowati/Shutterstock.com

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 Findings

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.

In Conclusion

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.