Frameworks – useful procurement tool or VFM killer?

We highlighted last week the new ESPO catering contract and the innovative platform developed by ESPO and Intenda for users to run mini-competitions using the framework, and our new White Paper on the topic of frameworks is available here, free of charge.  While we are of course biased, we do believe it is worth reading for anyone who uses frameworks and preferred supplier lists.

We cover a number of key issues in the Paper, including the benefits and the negatives around Frameworks. So today I thought we take some extracts from the Paper and highlight some of those negatives; then in the next part we'll come back with how these can be overcome.

Ian Watmore, Permanent Secreatry at the UK Government's  Cabinet Office, speaking at a conference last November, said “the argument on frameworks has been lost”. Yet they continue to be put in place – because they are very convenient, particularly in the public sector where they avoid buyers having to run lengthy EU procurement processes.  And they can bring commercial benefits and help manage risk by putting Ts and Cs in place with ‘approved’ suppliers.

Indeed, it’s difficult to see realistically how the public sector could operate without them. So the thrust of our Paper – like the ESPO / Intenda initiative itself – is around how we can make frameworks more effective in terms of delivering ultimate value. (Let’s hope Ian Watmore reads it – I think I’ll send him a copy directly actually...)

But here is Keith Davis, Director at the UK’s National Audit Office, speaking to Civil Service Live in 2010 and pointing out the potential problems.

“There’s too many frameworks, many of which just duplicate each other,” he argues. “Partly because there’s so many, the frameworks aren’t really effective at combining demand. You get good prices through a framework agreement if you can commit volume into it; then the supplier will respond. But we’re not seeing evidence that framework agreements are being effective in that – and that’s a huge issue.”

Davis is spot on, identifying a key issue with frameworks - the lack of commitment, which can reduce commercial leverage.  But there are other issues. There can be a loss of flexibility and competition - frameworks can lead the client organisation to a situation in which they are locked in to a small number of suppliers.  This can lead to those firms becoming complacent and taking the business for granted.   Generally, reducing competition does not lead to better value or performance.

Frameworks can also lead to buyers missing out on innovation and new market entrants by locking into a list of suppliers with no scope for new entrants for several years, excluding  new – or improving - suppliers who might offer real competitive advantage.   In a fairly static market, it may not be an issue. But in a more dynamic market, the position is quite different.

There’s also a temptation to go for “lowest common denominator” suppliers rather than those with deep competence.  In some markets, it is tempting for the procurement manager to look for suppliers who can perform very well in many different situations and across a wide market sector.  But such firms will not always offer the best value for money compared to a niche player with smaller overheads. They may not be the most innovative or able to respond quickly to demands, and they may not have genuine, deep specialist competence, or local knowledge: attributes that may be available from a more focused firm.

So there are some of the negatives; read our Paper for more discussion. But there are ways of overcoming these issues, and we’ll come back to those in the next instalment here later this week.

Voices (2)

  1. Andrew F Smith:

    My experience is that frameworks offer a lot of value; not least by creating active competition during the life of the contracts and helping to prevent the ‘lazy incumbent’ syndrome. It keeps people on their toes and, in my experience, provides a better outcome for the purchaser (both in terms of price and service received). However they only work if you have the right panel in the first place and if you are able to aggregate demand effectively. Too often it appears that in many businesses (including parts of the public sector) there is little or no mandate to use the agreements which results in a dilution of the spend; suppliers also soon get wise to this. However this is not the fault of the frameworks, more the people who operate them!

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