Procurement is a Cycle

By Matthew Jackson, on January 3rd, 2018

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Procurement is the process utilised by municipalities and other institutions to buy goods and services and historically has been undertaken on the basis of price. By this we mean the cheapest product or service often wins the contract and not necessarily the best quality or most effective.

Over the course of the last two years the Procure Network has been seeking to progress the way in which 11 cities across Europe undertake procurement.

We have sought to shift the way in which places, municipalities and institutions undertake procurement so that there is an emphasis on other factors. We have been particularly interested in how factors around quality can be embedded into procurement processes and specifically how procurement can be used as a lever to address local economic, social and environmental challenges.

procure_name_onlyTo enable these wider factors to be embedded into procurement we have been promoting the importance of procurement being seen as a cycle. This means procurement is not just a decision that leads to spending but links inherently to wider strategy, the design and development of goods and services, and the monitoring of wider impact.

We have been thinking about the cycle of procurement as having six stages, at each of which municipalities should be thinking about wider factors.

Stage 1 – understand where existing spend goes

The first is that places need to understand how their procurement processes are undertaken and where their procurement spend goes – they effectively need a baseline position of where spend goes geographically, in sectoral terms, and by organisation type such as SME. Without this understanding, places do not know where there is scope to shift and amend process and practice to deliver enhanced impact.

Stage 2 – identify outcomes for procurement to address

The second is that places need to understand which issues they want procurement to contribute towards addressing. They effectively need an Outcomes Framework which details outcomes such as: addressing unemployment; improving skills; and supporting the voluntary and community sector. There then needs to be political and strategic support to enable those outcomes to be built into procurement strategy and associated tender exercises.

Stage 3 – link outcomes to the design of goods and services

The third is that places need to think about when designing goods and services (commissioning) which wider outcomes they can contribute towards. This needs to happen way before a tender exercise. So as way of an example, when a new construction project is being devised, those designing it need to think about whether new job opportunities or apprenticeships can be created as part of it. They also need to decide what percentage of the procurement decision will be weighted to those wider outcomes, e.g. 10%.

Stage 4 – ask questions around wider outcomes

The fourth is that places need to embed questions around wider outcomes into tender documents. So they need to be asking potential suppliers ‘how many new jobs they will create’ or ‘what types of support they will provide for the voluntary and community sector’ or ‘whether they have an environmental management strategy’. This encourages suppliers to demonstrate in the tender process how they will contribute to achieving such outcomes.

Stage 5 – evaluate on wider outcomes

The fifth is that places need to score tender responses in relation to the responses to questions around wider outcomes. There are three ways of doing this – quantitative, so on the number of jobs a supplier states they will create; qualitative, so on the types of support a supplier will provide to the voluntary and community sector; or pass/fail, so on whether they have an environmental management strategy or not. This should complement evaluation criteria around price and quality.

Stage 6 – monitor the achievement of wider outcomes in delivery

The sixth is that places need to embed the outcomes which suppliers propose they will deliver into the terms of the contract. Monitoring of impact should be a consideration in each of the above components of the procurement process – places should be thinking about how they are going to measure the contribution suppliers make to the wider outcomes detailed in any Outcomes Framework. However, it is only once the contract is underway that monitoring can be undertaken. There are two main ways of monitoring impact. One is through reviewing how levels of spend have increased in a local economy through spend analysis and through undertaking surveys with a sample of suppliers around particular outcomes. The second is to contract monitor the delivery of wider outcomes on a monthly, six monthly or annual basis.

Procurement is fast becoming recognised as a way of achieving wider outcomes across Europe. Places need to take forward the stages identified above and apply them to procurement strategy and every procurement exercise they undertake.

 

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