Is procurement moving to the tender mercies of frameworks?
The past five years has seen extraordinary growth in the use of framework agreements by procurement in both the public and private sectors and currently represent around 45% of procurements in the UK.
This growth is speculated to be explained through public sector spending cuts and the need for local authorities to account for spend and to seek value. But are these frameworks offering a positive and negative value to the market?
It is the UK Governments plan to continue to increase spend via framework agreements, with particular focus on more Small to Medium Enterprise (SME) spend being awarded. In order to do so, government frameworks aim to become more SME friendly in terms of bidding and T&Cs.
So what is a Framework? A Framework agreement is between a buying authority (Single or Collaboration) and one or more suppliers which set the terms of contract such as price and quantity. Under the umbrella of these framework agreements a supplier can enter into one or more contracts with the authority in the period during which the framework agreement applies.
One of the main benefits of a Framework agreement is the full tender lifecycle does not have to be carried out for every product or service which is required. This is a positive to Procurement as it saves time and money in the costs in creation and issuing a tender. It also is a positive to potential suppliers as it save them time and money in responding. From this aspect it is only people whose chosen career is bid writing that can see a negative.
Another benefit of frameworks is that they can offer the ability level the playing field in terms of pricing. If a national Framework offers pricing on quantity, organisations such as the NHS are benefiting from economies of scale opposed to having the price dictated by the Trust’s location.
Frameworks can also offer additional sales and marketing of your product or service at no extra cost. Frameworks will be offering your product or service to potential buyers which your sales team may not be able to reach. In addition to this Frameworks operated by private buying groups will have their own sales team promoting their offerings so in some ways you could view it as gaining additional members to your sales team. However in a glass half empty point of view, they will also be promoting your competitors.
In my opinion the major disadvantage to frameworks, is that they can be unresponsive to change and far less agile than SMEs. The standard framework duration is 4 years, except in exceptional circumstances where it can be longer. Framework agreements do not allow companies to enter the framework once awarded, so this can make it very difficult for new companies to establish and grow if start up is during a key framework agreement.
Another major pitfall is that there is not a guarantee of work. Although this is the case for any bid or tender, the applications for frameworks tend to take a lot more time and effort compare to a standard ITT. It can also offer the Buyer a better freedom of choice and if the Framework is operating to a call-off function, there is no commitment offered and suppliers can be changed at a drop of a hat.
In general I personally believe that Frameworks are a positive force in the market place.
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