3.4 Procurement

Last edited: 06 September 2011

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1. Introduction

Depending on which model for the delivery of Facilities Management (FM) services is adopted, the costs and complexities of procurement can vary hugely especially if shared services are involved. Public bodies are bound by a range of legal obligations under the various local government Acts and EC Public Procurement Law. 

This section is not intended as a detailed guide to all aspects of commissioning and procurement, but rather an introduction to some of the considerations when deciding on methods of sourcing and how these should fit in within the overall corporate aims, objectives and strategies of an authority. It is recommended that legal advice should always be sought when carrying out any procurement exercise. 

2. Commissioning and procurement - definitions

Commissioning is the process of meeting needs for whole groups of service users and/or whole populations. It provides for a “whole system” approach to developing improved outcomes, which links strategic objectives, the intermediate outcomes required from individual services and specific outputs required from delivery arrangements. It involves developing policy directions, service models and delivery capability to meet those needs in the most appropriate and cost effective way; and then managing performance and seeking service improvement through parallel management of various relationships with providers and partners. 

The stages of commissioning will usually include:

  • carrying out an assessment of need,
  • identifying resources available
  • planning how these can be sourced
  • organising the delivery method
  • reviewing performance

Procurement is the process of acquiring goods, works and services, covering both acquisition from third parties and from in-house providers. The process spans identification of needs through to the end of a services contract or the end of the useful life of an asset.  Whilst this encompasses a broad spectrum, and may not involve a formal external procurement exercise, it is important to gain input from procurement experts to ensure that all options are adequately considered. Not only will they be able to provide support and advice on legal and contractual matters, they will also be able to make a major contribution into business decision-making around collaboration models and the choice of suitable partners.

An effective procurement approach will support the option development in ensuring that any future FM solution will:

  • Be aligned to the drivers and strategy for change
  • Deliver the ‘Best Value’ service solution taking into account costs of procurement, commissioning and management of any contract in addition to the quality and cost of providing the FM service.
  • Be compliant with public service obligations and legal procurement duties.

3. Strategic approach to procurement

The public sector environment however has moved a long way from the days when ‘services’ were provided by ‘the public sector organisation’ from their own buildings, and we now have a vast variety of service models, service methods and service providers. This means that approaches to procurement of FM need to adapt to new models as modern methods of service delivery often require a more strategic and high level approach. This is particularly the case where a number of public sector organisations may work together to deliver services from one location and could result in a joint procurement exercise, a sharing of FM functions, or one body providing the facility and FM functions for several organisations through a rental or fee based arrangement.

What is important therefore is that ‘asset management strategy’ needs to be coordinated with the procurement strategy (and other key resources) at a corporate level, and it is only when this is achieved that procurement can really be totally effective. It is not just that the asset management strategy will inform the procurement strategy, but at the same time the procurement strategy needs to inform the options for the asset management approach.

The results of property reviews (either with partner organisations or individually) may suggest a number of different scenarios which may, or may not involve procurement. It is only when the implications of each option (including benefits and disbenefits of different options) are taken into account, that a way forward should be chosen.

The advantages of early ‘procurement’ involvement in the process can include:

  • Improved information and specification of key outcomes that can be achieved.
  • Greater potential of collaboration with other purchasers/providers of FM.
  • Procurement approaches can be more easily tailored to service/customers’ needs.
  • Early engagement with the market, or improved market intelligence can test how practical a solution is, or whether it goes far enough with the technological and other innovations available within a specific field.
  • Purchaser bargaining power can be increased
  • Better risk management can be built into the process.

Too often, public sector organisations choose an FM solution before considering the implications for procurement. Procurement is then carried out as a means to delivering this solution, without thorough consideration of what the legacy will be at the end of the contract or how future change in service provision will be accommodated. 

Sale and lease back for example is being viewed by many organisations as a vehicle for overcoming current capital difficulties, and it is clear that this may be of benefit in certain situations.  However it would be wrong to enter into such an agreement  simply because of a short term capital problem without putting this in a wider service and asset management context. For example it may be difficult to introduce additional out of hours activities or community use of the premises if it wasn’t envisaged within the original contract, or significant service changes could result in a building not being utilised to capacity with little flexibility within the contract to adjust space for other usage. 

Other strategic considerations may introduce key policy aims or objectives or standards for procurement. These could include value for money requirements, social value, environmental, economic and ethical issues.

What is important is that the implications for, and from each procurement route are considered at the right level and at the right time.

4. Co-ordinated procurement 

Once more definite needs are developed it is imperative that options are viewed across all of the potential procurement programmes and not just as individual exercises. Different options will present themselves and these need to be developed, tested and worked on with partner organisations to ensure the best solution is adopted.

Historically the public sector has tended to procure by way of one-off tenders. The argument for a single procurement exercise is that it often provides value for money based on current local market rates and prices. Whilst this is sometimes the case, markets, especially within the FM and construction/maintenance industries can be extremely volatile. Such one-off tenders can also lead to repetitive and high procurement costs, or potentially unattractive packaging to larger suppliers of FM services. 

Whilst there still may be a place for one-off procurement exercises, public sector organisations are more commonly looking across the whole range and value of procurement activity for opportunities for framework agreements or longer term partnering type approaches, including with the wider public sector.

There may be specific legal constraints to setting up longer term agreements which need to be considered, but in general they can offer a number of benefits, including: 

  • Enhancing understanding of service and delivery requirements and how FM approaches can support this whether based on a single service, or more fundamentally where a range of services are delivered from the same location.
  • Improved contract performance monitoring and benchmarking
  • Prompt rectification of faults and problems
  • Closer working relationships and understanding of what is expected from all key stakeholders.
  • Savings in repetitive procurement costs
  • Relative reduction in need for in-house supervision and associated costs

5. Tendering considerations

Where a tendering exercise is involved, it will be important to include relevant priorities and criteria used in the initial development of options to ensure that these are adequately reflected within the final delivery solution. The following issues should be addressed in any tendering exercise:

  • Reinforcing aims and objectives through the procurement process:
    • Are the aims and objectives outlined in the business case and option development adequately incorporated within the tender documentation and translated to potential service providers?
    • Have these requirements been adequately described and do they focus on measurable outcomes?
    • Do the evaluation criteria suitably reflect important issues through both inclusion and priority weighting?
    • Do the criteria clearly reflect current and future priorities?
    • Have risks been adequately considered and identified which can either be sensibly transferred to suppliers or must be retained?
  • Evaluation considerations:
    • Have financial aspects been separated from the non-financial aspects for evaluation purposes, together with a methodology for bringing these back together prior to a final award decision?
    • Have all costs been taken into account associated with the procurement, such as related staff training, accommodation and management/ supervision costs?
    • Have the costs of transition been identified and estimated?
    • Have benchmarking techniques been introduced to ensure that longer term value for money will be represented by the chosen solution through external comparison and standards?
    • Are the contractual arrangements suitable to allow for potential changes in the future whilst at the same time protecting value for money and quality of service provision?