Buying Complex Services; The Pros and Cons of Frameworks – Making it Work

In part 1, of Buying Complex Services - the Pros and Cons of Frameworks, we looked at how frameworks or preferred supplier lists could be used when it comes to buying complex professional services such as management consulting or legal services. We pointed out the pros and cons of these approaches, so today we will consider the steps procurement can take to get the most out of frameworks, if that route is chosen as part of a procurement strategy.

The first critical point - which seems obvious yet isn't always considered - is that there must be significant spend in the category in question, in order to justify the effort (for the buyer and providers) of setting up the framework in the first place. Allied with that there must be a strong enough level of stakeholder commitment to using the framework (either voluntarily or via robust governance and mandate) to justify the effort.

Now achieving that buy-in is another topic in its own right, but assuming that is present, there are a number of steps that will help ensure the framework operates successfully through its life.

  • Look to involve stakeholders, particularly the key budget holding users, in defining requirements, and evaluating and selecting the firms that will populate the framework. Clearly, this increases the chance of those users both feeling good about the process, and then using the framework.
  • Segment the framework to an appropriate level. That will depend on both the range of services required, and the level of spend. it is unusual that for instance that one small group of consulting firms, even large ones, can satisfy all the various needs of a large buying organization. Appropriate and more specialist suppliers may not only do a better job but may well offer lower costs too - an overall value win.
  • We know it is tough to obtain best value for money without committing spend and volume, so if some commitment can be offered when setting up the framework, that may help. But if that isn't possible, a robust line needs to be taken with suppliers to seek advantageous terms and conditions as part of the framework agreement.
  • However, whilst negotiating should be robust, it is wise to avoid getting fully locked into pricing. By all means agree standard terms and conditions through a framework but pricing is unlikely to be market leading without guaranteeing business. So lock-in is unwise.
  • That suggests building the use of further competition into the process for using the framework. That can be between firms on list, or even involving “outsiders”, to extract the best possible value from the suppliers. (But obviously if this goes too far or gets too complex, any efficiency benefits of setting up the list can be negated). That also means being open to the use of fixed price, performance related or risk sharing commercial arrangements where they are appropriate - such deals can only be negotiated at the point of contract, not when setting up the framework.
  • Manage the suppliers and the contracts once assignments are underway. That applies to both strategic level overarching framework management, (usually carried out with procurement in the lead) and specific assignment management (probably led by the commissioning user).
  • Ensure some flexibility is retained to remove or add suppliers reasonably regularly and promptly. A list should not be cast in stone for 3 or 5 years. Markets change and interesting new providers emerge and develop, so having the flexibility to consider new suppliers and perhaps bring them into the framework is sensible. This will also increase user satisfaction, as they see the possibility of introducing any new firms they may discover onto the preferred list.

In some cases frameworks can certainly be a useful tool. But if not put in place sensibly, they can end up either not used, or can merely providing an easy route for budget holders to engage providers at high prices! We’ve seen that happen, so consider this advice before you go too far into framework land...

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