Significant moment for public procurement; Vehicles OJEU published, first ‘mandatory’ government contract

I've just learnt that the OJEU advertisement for the first mandatory central government contract was published last week here, with Buying Solutions the contracting authority (despite a lot of chat about Departments taking the lead on such centralised contracts). It is for vehicles, with five lots covering cars, light commercial vehicles, medium / heavy commercial vehicles, motorbikes and buses & coaches.  It is also open to use by any other public sector body.  The interesting wording comes here :
"the use of this framework agreement for the supply of motor vehicles to Central Government Departments, Executive Agencies and Non Departmental Public Bodies will be mandatory".

That is the first use of the 'mandatory' word I have seen in such an advert, and it is interesting to speculate about how that will be enforced, particularly around the huge number of non-departmental public bodies.

But in terms of the underpinning procurement strategy, the description in the OJEU for the car 'lot' for instance says that up to 25 suppliers will be appointed.  So this is a long way short of the approach that would undoubtedly get the best VFM result; corralling real demand, then going to the market and saying 'we need 5,000 of these cars over the next three years".

This approach aggregates potential demand, with the added teeth of a 'mandatory' label.  It is still therefore some way short of a fully commercial aggregation programme in the way the private sector might approach it, with a firm order for thousands of vehicles.

In fact, it looks like a 'traditional' Buying Solutions framework (with the mandatory twist), so for instance in the case of cars, (assuming anything close to the 25 suppliers are appointed) pretty much every major car manufacturer is going to win a place on the framework.  How competitive will their bid prices need to be to get on the list? (And remember that the contracts and prices will be published under the new transparency initiatives). So my money is on them coming in at about list price minus 10%.   A gesture from the suppliers, but not enough to upset other big buyers; and of course there is still NO volume commitment here to drive the maximum pencil-sharpening from suppliers.

So the purpose of this framework is really one of convenience - saving contracting authorities from having to run their own EU competitions.  Clearly, the main value is going to be generated at the 'mini-competition' stage of the process, where individual contracting organisations will have to approach all the firms on the Lot and get specific offers.  (It is unlikely in most cases that EU regs will allow them to merely approach one supplier on a Lot).

The value obtained there will be very much driven by the volume on offer and commonality of specifications at the time of further competition; so I would suggest we need a process to aggregate demand across multiple contracting bodies at that stage, and look at using reverse auctions perhaps to drive prices down.  Otherwise numerous mini-competitions for small numbers of vehicles will be neither efficient or effective in generating ultimate value.

Is that the plan? Anyone from Buying Solutions or ERG like to comment?

Voices (8)

  1. Richard Bell:

    I completely agree that the appointment of 25 suppliers in a vehicle category is unlikely to yield significant results and potential contract users will likely find the framework unattractive.

    Albeit that my experience is in the international private sector, I have found it possible to cut great deals on commercial vehicles particularly during an economic downturn. However, this was only possible by signing a sole manufacturer deal. As a category management team we did not require a common specification, but we did require specifications to be defined upfront by participating entities, which were spread over 3 business divisions and 15 European countries.

    We also forced manufacturers to contract on maintenance and residual values so that total cost could be determined.

  2. Adam Hobbs:

    So – given the likely blunting of any competitive baseline price on this framework, if a CGD cuts a deal with an unlisted supplier (possible with the advent of new vehicle technologies) are we to understand that they won’t be able to do that deal until OGC are able to renew the framework?

    Or will there be a let out – which would hardly make this mandatory.

  3. Florence Gregg:

    It would in interesting to find out what genuine savings/efficiencies were achieved from the 2006 framework and, perhaps more importantly, how many other contracts were awarded over the same period to see what the potential volume of business through the framework could have been.

    From being listed on a number of frameworks with less than 10 suppliers, I know that the contracting authorities with sub-EU requirements will still opt to run their own quotation/tenders because they ‘can’t be bothered going out to, say, 8 bidders’ via a mini competition. I doubt that any/many with smaller requirements will want to use a framework with that number of suppliers.

    I feel other hurdles to its success will be the communication of the mandatory nature of the framework and its communication down to grass-root levels and, if there is genuniely wide interest from all potential users, there will be on-going interest from the suppliers to a multitude of FRQs for 1, 2 or 3 vehicles?.

    From the ‘other side’, how will it be policed and what penalty will be applied to contracting authorities that ‘do their own thing’?

  4. Rob:

    perhaps they’ll throw in a spare tyre as part of the deal…

  5. Peter Smith:

    Good point Paul – do we know how many vehicles were bought through that framework? It wasn’t mandatory though – it may have had ‘support’ but there were no sanctions as far as I’m aware if people didn’t use it. I do also know of a couple of organisations who told me they could get a better deal (for quite small numbers of cars) than the framework – which demonstrates the problem with ‘no committment’ frameworks.

    Steve – thanks for that, re-assuring, and look forward to seeing huge auction-driven savings!
    Jonathan – good point re the buying freeze. It will take 6 months i guess to put the framework in place so such a freeze would seem to be a very good idea.

  6. Jonathan Rollason:

    Peter,

    Thanks for highlighting the initiative. As you say they will only get real value by advertising a particular requirement. We recently did a reverse auction for a huge number of vans. If that experience is anything to go by the Government will miss out on considerable savings by taking a loose approach.

    As a stop gap it may work but real value will only be delivered when there is a coordinated bid with agreed numbers and a common specification. That will take some time. A buying freeze until its done might hasten the programme?

    Kind regards,

    Jonathan

  7. Steve Duckworth:

    Peter,

    The strategy for this framework is to further compete Central Government requirements by standardising vehicles to a given specification (removing the badge from of the equation) and eauction them in large batches in line with demand.

    So far from the previous approach im sure you will agree.

    Steve Duckworth ERG (OGC)

  8. Paul Snell:

    A previous cross-government framework agreement (launched with much fanfare back in 2006 – http://www.supplymanagement.com/news/2006/government-drives-car-deal/?locale=en) only had 15 suppliers and all ready had the support of 38 government departments/agencies. Price cuts of 15 per cent were promised and savings of £100 billion (on a spend of £1 billion) were promised.

    It would be interesting to compare the new “mandatory” framework, and the expected savings, to this “collaborative” (for want of a better word) deal.

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