Breaking news: OFT report on competition and implications for public procurement

The Office of Fair Trading has just published their report on "Commissioning and competition in the public sector".

The initial headline from a quick skim though is that Government commissioners and procurers of public services need to take more account of competition issues, and act to leverage competition and develop strong markets, which will drive value for money.

As the OFT says;

"commissioners and procurers too often take a simplistic approach to achieving competition assuming it is sufficient to have an open and transparent tender process that attracts more than one bidder".

Barriers to entry, barriers to exit (e.g. how to get rid of under-perofmrnauing suppliers), achieving genuine choice, and creating appropriate incentives are the four main headings in the report. One aspect that will certainly cause some comment is the focus on the dangers of aggregation and more centralised procurement, given all the initiatives going on with that sort of flavour around the public sector at the moment.

"Joint purchasing projects by commissioners and procurers can help achieve the benefits of greater buyer power. However, these projects can also, potentially, limit supplier participation through having larger contracts that smaller suppliers are unable to bid for".

The OFT recommends that buyers consider dividing or dis-aggregating contracts and using lotting strategies to help competition and encourage a wider range of bidders. They also point out that smaller suppliers can be put off bidding by outcome-based or risk-sharing contracts; and make suggestions about 'equalising' bids where in -house providers are competing with external providers.

There's a lot of content in the report; it looks pretty readbale as well, and there are some interesting case studies. The 'Merlin Standard' developed by the DWP gets a good review.

"The Merlin Standard has been designed to recognise and promote sustainable excellence and positive partnership working within supply chains and provide guidance to those seeking to achieve it."

Anyway, we'll come back and look at the findings in more detail when we've read it all more carefully!

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First Voice

  1. Dan:

    This bit caught my eye:

    “The OFT regards it as vital, in this context, that commissioners and procurers in the public sector are competent and strategic buyers…”

    How are we suppposed to be strategic buyers when the government can’t actually come up with a coherent strategy?

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