3 Reasons Why Public Sector Tenders Should Use Dynamic Purchasing Systems

Spend Matters welcomes this guest post from Marko Rossi, product manager for Cloudia, a source-to-pay provider.

Dynamic purchasing systems have advantages over the venerable framework agreement, which has been the go-to structure for public sector authorities looking to procure goods and services for many years. Designed to remove uncertainty, traditional framework agreements typically bind vendors and authorities into four-year relationships that ensure all parties within the agreement commit to each other for the long term.

This works perfectly well — if the pace of societal and economic change is serene. The world today doesn’t quite fit this picture. A supplier that meets buyer requirements today may go out of business tomorrow, or their circumstances may change so drastically that they may struggle to fulfill their contractual duties.

Dynamic purchasing systems (DPS) were purpose-built to address these flaws. The London Procurement Partnership describes DPS this way:

“A dynamic purchasing system is a completely electronic system used by a contracting authority (buyer) to purchase commonly used goods, works or services. Unlike a traditional framework, suppliers can apply to join at any time. It is an ‘open market’ solution designed to provide buyers with access to a pool of pre-qualified suppliers. A DPS is usually set up by central purchasing bodies … and made available for use by the public sector.”

Here are three reasons why public authorities should consider using DPS when creating tenders:

1. Tenders remain open to all

When DPS is used, the tender remains open to all vendors throughout its entire duration — even if they weren’t part of the original selection phase. This means vendors who don’t initially match selection criteria can make necessary adjustments and reapply when they are up to standard.

In the meantime, new vendors may enter the market and build service offerings that deliver more value. Instead of committing to the four-year black box of a framework agreement, public authorities using DPS can work with new market entrants at any point instead of waiting until their framework agreement runs its course.

2. Increased value creation and less waste

DPS also allows public authorities to open tenders up to smaller local vendors who would otherwise miss out. They can participate where they have the capacity to deliver and skip projects outside of their scope. For example, a local construction company with a piece of specialist equipment can deploy it on-site when the need arises.

Additionally, just-in-time purchasing of goods and services allows public authorities to waste less money and deliver service more efficiently. Dynamic, fluid projects like construction have constantly shifting demands. Product requirement baselines and contract terms can quickly be added to the system, meaning tenders can be created, bidding processes executed, and goods and services received in a matter of days, not weeks.

3. No lock-in to punitive agreements

DPS also solves the issue of how long each agreement should last. There are many cases today of public authorities using DPS to create agreements that last for decades. If at some point the DPS is no longer needed, it can be closed almost immediately.

In fact, the flexible nature of DPS means public authorities no longer need to use their crystal balls to predict with 100% accuracy what services and goods they will need — at what point, and for how long — when planning tenders.