Keelvar and Norfolk – value and supplier engagement via procurement optimization

We mentioned a while back a new eSourcing firm called Keelvar. Their product fits into the optimisation space (or “market informed sourcing”, as we call it), but unlike some of the market leaders in that field, it is positioned as being suitable for non-expert users. It  enables buyers to carry out complex procurement optimisation exercises, with multiple lots, evaluation factors and constraints, but all presented with a very user-friendly interface.

We asked Keelvar if we could talk to a client and they suggested Norfolk County Council, so my colleague Thomas Kase and I caught up with Al Collier, Head of Procurement for the Council, and Ian Hydes from their procurement team, to share their experiences using the product.

Collier emphasised that Norfolk have so far only run one actual procurement using the platform. But now they have bought the Keelvar  product, they have another coming up shortly and plan a series. They also did not use the full capability of the product in this first exercise. Rather, they provided suppliers with a spreadsheet for completion, which Keelvar then loaded into their platform and ran the optimisation exercise. However, in the future Norfolk intend that suppliers will enter data directly into the system.

We asked why Norfolk hadn’t used optimisation technology previously. “We have looked at it”, explained Collier. “But the cost made it difficult to sell to internal stakeholders”.

The procurement they chose here falls within Hydes’ Transport category area, and is a specialist requirement for people requiring kidney dialysis.  “The contract was worth around a million pounds a year, with a mix of large firms and smaller firms currently supplying”, he said. Norfolk particularly want to encourage SMEs, who often are competitive, particularly in the sparsely populated parts of the largely rural county.

Using the platform enabled Norfolk to divide the requirement into 111 small lots – far more than they would have done under a traditional procurement exercise.  Potential suppliers could offer volume discounts according to the  lots they were awarded, or could bid for more lots than they could handle, then define their constraints. The flexibility also allows tenders to cover one-way journeys, not just roundtrips, which suits the market and leads to further value improvements.

The result of the tender was impressive. 29 suppliers submitted compliant bids, with many offering discounted bids and highlighting capacity constraints. 16 different suppliers won contracts, there was a saving of around 5% on the total cost, and the tender evaluation was completed quickly with no supplier challenges. Apparently – and I confess, I have not checked their Maths – there were 69,289,989,882 possible outcomes from the tender!

“We have achieved better access for SMEs, and cost reduction – but we suspect the contract is also more profitable for the market, because of the choices the bidders could express” said Collier.

We then talked about the future in other spend categories. Collier sees potential in areas including domiciliary care, waste disposal, construction and refurbishment. A big attraction of the technology is the ability to aggregate demand, perhaps putting together opportunities with other public organisations, whilst enabling SMEs to compete effectively through defining niche packages and submitted smaller bids. I asked about how this process fitted within the EU Public Procurement regulations.

“Keelvar have done good work in that regard – they provided wording to use in the tender documents, approved by legal experts.  As we used just a single round of bidding, you don’t have to indicate that an auction will be used, but of course you have to explain award criteria carefully as always. In this case we said that award would be based on lowest price, but taking into account constraints and discounts”.

That might change in the future, as quality criteria can be introduced. And the system capability could be used more fully in terms of testing options.

“It may be possible to use multiple bidding rounds under a different EU procedure, and then try the “what if” scenarios that the software allows – we didn’t do that this time though”.

The final word goes to Collier.

“With continuing pressure on costs, we can’t get to where we need to be in public procurement by simply beating up suppliers on margin. This sort of approach can generate benefits for the buyer, but also gives the suppliers more control and allows them to come up with the best solutions. That is where we have to be heading”.

(Thanks to Al Collier and Ian Hydes for sparing the time to talk to us!)

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