Last week, the National Audit Office (NAO) and Financial Times reported a potential £500m savings opportunity through increased use of public sector frameworks for sourcing of goods and services.
From Akeso’s first-hand experience supporting NHS and Central Government clients over the last decade, as well as running a category management service for NHS Supply Chain that delivered £120m in savings, there are undeniable benefits to be leveraged as a result of centralisation and increased oversight of spend that frameworks provide. However, although seemingly a no-brainer, it is important to recognise that they are not without their challenges.
To dissect this further, our Managing Partner, Chris Robson, has shared his insights on why we use frameworks, the challenges for operators and how these challenges could be overcome to drive even more value for all concerned (operators, buyers and suppliers).
The case for using frameworks is clear: savings opportunities, better spend oversight, limited buyer and supplier capacity, improved standardisation and quality assurance
Before examining the specifics, it is pertinent to remember that the higher the spend, the greater the opportunity for savings. For UK public procurement, expenditure exceeds £300 billion, of which Health and Social Care represents almost a third [1]. So naturally, the opportunity to leverage the drivers of cost reduction through framework sourcing in this sector are significant.
Secondly, without frameworks, suppliers would have to respond to tenders from thousands of government customers. The cost involved in handling tenders on this scale would require a step-change in the sales capacity of the supply base, far exceeding the numbers set out by NAO. Equally, buyers would be responsible for absorbing the time and cost of managing the end-to-end procurement process, including the development of bespoke requirements – a key issue in the lack of standardisation seen across the public sector.
On the topic of requirements, all government bodies have a mix of category-level requirements and terms and conditions. Some are highly specific to the category, such as medical products, but many are cross-departmental e.g., Digital, Professional Services and Facilities Management. Frameworks provide a means to consolidate and standardise into a commercial wrapper, which is particularly valuable for common goods and services. Where there is a need for complex and infrequently sourced long-term contracts or specialist expertise, the availability of a framework is equally beneficial as it provides an assured, standardised and valuable route to market. A good example of this is the provision of pathology managed equipment services.
Based on the above, many would assume the option for a single UK government buying entity would be the solution. Whilst great in theory, this is an unlikely reality as it would trigger further fragmentation of government buying power in the event that buyers go direct to market if the sole sourcing route does not provide suitable commercial options and value-for-money. Therefore, frameworks occupy a middle ground which offer similar benefits to a buying entity (granted on a smaller scale) whilst remaining commercially attractive to both buyers and suppliers.
So, what’s the challenge?
Truly understanding the requirements of the user and ability to respond to industry developments within regulatory constraints are the most common challenges.
Unless a framework is established by a public sector service provider, they are often defined and managed by intermediaries who are at least one step removed from the user. Consequently, they may not have recent or relevant experience of how a product or service is being used, and in the worst case, are not fit-for-purpose.
Additionally, in most markets, suppliers who are accountable to shareholders invest in technology and innovations that extend, differentiate and reduce the cost of their offerings. Unfortunately, we have seen many examples of frameworks operated by a public sector intermediary failing to keep pace with the latest trends and technologies due to regulatory constraints. Unless actively managed, frameworks can quickly age which then prompts the proliferation of frameworks as each operator takes the last framework and expands, diluting the benefit of a small number of category-specific frameworks in the process.
Unimpeded by such regulatory and approval issues, private sector framework operators will very actively manage the portfolio and content of frameworks to ensure they are relevant and serve customer requirements. However, this does not come without cost, as the NAO points out.
There is also variation in the prescriptiveness and quality of frameworks available in the market across both public and private sector framework providers, coupled with constraints in capability and capacity to access and use the frameworks effectively. This is further exacerbated by the limitations of digital procurement solutions, related to both functionality and user engagement.
Tackling the challenges relies on flexibility for buyers and suppliers and quality assurance from operators
Allowing public sector framework operators the same regulatory flexibility as the private sector would encourage providers to take steps to ensure that they are dynamic and flexible to new technologies and innovations. As a result, the public sector would benefit from access to the latest industry offerings and suppliers would be less frustrated by the restrictions on their public sector contracts that stop them differentiating themselves from competitors.
Frameworks can also limit the effective engagement of Small and Medium Enterprises (SMEs), either due to the cost of tender response or restrictive criteria. Encouraging SMEs by enabling greater access in the public procurement process is critical to delivering choice and flexibility, and in growing the UK economy.
Better management and consolidation of frameworks in a given sector would improve quality assurance and drive greater value through operators who proactively manage frameworks to ensure they provide services that are fit-for-purpose and of the highest industry-standard.
Closing thoughts…
To better leverage the benefits that frameworks can deliver, public sector operators need to offer their customers assurance that they can access to the goods and services they need, both common and complex, without restricting choice, value-for-money or technological advancements. This means keeping up to speed with innovation in a commercially efficient and compliant way, and considering what is needed at the point of use. Equally, public sector customers should not be afraid to actively review and manage their purchasing activity and explore different routes to market, commissioning and commercial models, where appropriate.
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