Tag Archives: procurement frameworks

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!

Dynamic Purchasing Systems and the Death of Frameworks

Will the use of Dynamic Purchasing Systems grow as a result of amendments to EU Procurement Directives? And will they provide a solution to problems of both buyers and suppliers?

As procurement professionals we are familiar with the use of frameworks as a contracting mechanism. The 2015 amendments to the EU Procurement Directives have sown the seeds of change, but will this result in a growth in the use of Dynamic Purchasing Systems (DPS) and a decline in framework agreements? Could DPS be the panacea to the problems of both buyers and suppliers?

Dynamic Purchasing Systems are a relatively marginalised process and have been under used due to their complexity. The up-dated EU Regulations have seen four changes around the use of the DPS, which has simplified the process.

Benefits

Use of a Dynamic Purchasing System seems to offer several benefits and, as we operate in an ever-changing environment, it seems perfectly sensible to adopt increasingly dynamic procurement methods. Many of these benefits could lead to savings and supplier growth, which are high priorities on the government’s agenda.

  • Gives Suppliers Another Chance

DPS gives suppliers another bite of the public sector cherry if at first they are unsuccessful. Many contractors are not poor suppliers, they are poor tenderers. The use of frameworks unnecessarily locks these suppliers out of the market for up to four years. DPS offers a solution where if they don’t succeed at first they can try, try, try again.

  • Increased Competition & Competitive Pricing

As the mix and number of suppliers on the Dynamic Purchasing Systems evolves, it is likely that this will lead to an increase in competition. A report by PWC in 2011 noted that ‘Dynamic Purchasing Systems are the most successful type of procedure in terms of attracting a large number of bidders’.

Direct award also isn’t permitted, so the decision on best value can only be decided at tender stage. This is likely to result in more competitive pricing from suppliers.

  • Development of Long-Term Relationships

A dynamic purchasing system can now run for more than four years. A review of ‘live’ Dynamic Purchasing Systems found examples with a proposed duration of a decade! As austerity measures remain in place, and procurement professionals are constantly required to do more with less, DPS could be a solution to expensive re-procurement exercises.

It has been said that the EU regulations can make developing long-term, value generating supplier relationships difficult due to strict time limits on contracts, and the mandatory competition required over the threshold values. However, if suppliers are no longer looking over their shoulder at a looming re-procurement, DPS could support the development of these relationships with key suppliers.

  • Fully Electronic

As DPS is conducted solely through electronic means, the various advantages of e-procurement are present here. However, it is imperative that the infrastructure is there to support the process. The maturity of systems and the change in the EU regulations may serve to create an environment where DPS can flourish.

Current systems can also be adapted to run a DPS so there should be no significant change management or training required unless new systems are adopted.

  • Bridge Talent Gap

Currently public sector purchasing is experiencing a talent gap. Greater use of DPS could go some way towards alleviating this, as it could potentially reduce the number of full EU processes an organisation is required to undertake. Further efficiencies could be made if dynamic purchasing systems were used as part of collaborative or consortium purchasing.

  • Spreading & Minimising Risk

The public sector has been branded as a risk averse creature. Therefore, one may imagine that the use of a variant on a procurement procedure may strike fear into the hearts of procurement professionals. Public sector professionals are becoming far more innovative, but the risk averse nature of the public sector could be a reason why, despite the simplification and flexibilities added, the DPS may remain under utilised.

Risk of challenge to a procurement is never far from the minds of  procurement officers. One wonders that if suppliers knew that they would be able to re-apply to join the DPS, whether this would reduce the number of unsubstantiated challenges that contracting authorities have to fend off.

Finally, a DPS is likely to have more suppliers awarded into the system than a framework agreement. This would serve to spread the risk for authorities.

Drawbacks

Conversely, there are a number of reasons why the changes in regulations may not result in an increase in the use of DPS.

  • Administration of Suppliers

Although there are efficiency savings found in not having to re-procure every four years, these could be eroded by the fact that buyers may have a regular stream of suppliers requesting to be accepted onto the DPS. This is likely to be exacerbated in certain markets and by the fact that documents have to be evaluated within ten working days.

The authority also has no possibility of restricting the maximum number of operators. Constant applications by serial tenderers could be mitigated by providing detailed feedback on the reasons why they were unsuccessful.

  • Risk of Obsolescence

If a DPS has been running for too long it may become obsolete. Over the course of several years the requirements of an authority may change significantly. However this could be overcome by good contract and category management as well as an annual review.

  • Up-Front Costs

There are likely to be additional costs the first time that an authority uses this process in the form of e-systems development, training and preparing the market. Procurement policies and internal processes will also need to be up-dated. However, removing the four year limit should go some way towards alleviating these costs, as they will be spread over a longer contract term. Up-take may also depend on how DPS is viewed by internal customers.

Have you worked with a Dynamic Purchasing System in public sector procurement? What were your thoughts? If you’re looking for evidence of benefits in DPS use, make sure you keep a look out for the second article in this series.