Regardless of the industry you operate in, tendering for new service contracts is not without its pain points. Whether it is the length of time associated with the tender process, the cost involved, administrative issues, meeting compliance, and regulatory requirements, or even the overall bureaucratic and management process, it quite rightly can take its toll on an organisation, writes Ross Macmillan.
So, in light of these challenges, what impact is this having on government departments and public sector firms?
Recently, research conducted into service contracts identified that increasing numbers of organisations working within public sector and government departments are not seeing through the full tender process when applying for new service contracts. The reasons highlighted for this are consistent with industry concerns surrounding the necessary time and financial costs that need to be committed in order to complete a full tender process.
Time periods involved within a tender process can be anything up to four months, with the associated costs running into the tens of the thousands of pounds. Combine this with the need to bring in specialist staff, and it’s no wonder that the tender process is approached with caution and reluctance; ultimately this creates an element of strain.
The resistance to review existing service contracts in the private sector is not uncommon, however public sector firms and government departments will likely have long standing relationships with particular vendors, which go back years and years. After all, they trust their organisation with these firms, they have confidence that these existing providers know and understand their operations – and as the old saying goes, ‘if it ain’t broke, don’t fix it’. All of these are fair points, but sometimes it’s worth pointing out that change is necessary in order to progress.
Organisations that fail to evolve, and adapt to market changes (or drive them!), risk being stuck with legacy and out-dated systems and services that are no longer fit for purpose. Ultimately, this impacts the customers (or citizens), both in their pocket and in the quality of service that they receive.
It also potentially creates an unhealthy vendor lock-in situation, whereby markets are dominated by a core selection of service providers. New entrants to the market therefore have difficulty breaking down the barriers created through these long-standing relationships, therefore restricting again the opportunities for change and innovation.
So in light of this what alternatives are there available to the traditional tender process? One alternative that is often overlooked is a framework agreement.
Framework agreements are commonly set up to cover things like office supplies, IT equipment, payment services, repair and maintenance services etc. If the framework agreement is awarded to one provider, then the purchasing authority can simply call-off the requirement from the successful supplier as and when it is needed without the costs and time of going to tender. Also, as framework agreements already comply with standard EU procedures and rules, it therefore avoids any legal challenges arising from non-compliance that can commonly exist through tender exercises.
In light of this, it would be fair to wonder why more organisations aren’t pursing a framework agreement approach when it comes to reviewing service contracts. Clearly concerns do exist around the tender process, and therefore it’s imperative that public sector firms and government departments are aware of all the options available.
Arguably it is a case for providing more education. With this in mind it is imperative that all the necessary stakeholders work to address these concerns and therefore provide greater understanding and available support material detailing the mechanics of the framework agreement and the benefits its can provide.
As stated, education is essential to this – the overly complicated nature of the tender process will increasingly see more and more government departments and public sector firms explore alternative options when it comes to renewing their service contracts. Opting for a framework agreement takes away the pain-points currently being felt by those parties as they can utilise this without the time and cost of going to tender. The fallout then allows these departments and firms to concentrate on their day-to-day activities safe in the knowledge they are being supported by a proven supplier.
Ross Macmillan, market intelligence consultant from payment collection specialist allpay