Are procurement frameworks relevant to the 21st century?

Framework Agreements have their place – specifically when it relates to the acquisition of commodities. The question is this: with a rapidly-evolving commercial landscape, and a strong technology platform culture, with services taking up a larger percentage of what is procured, do we need framework agreements in the 21st century?

There have always been preferred suppliers in one form or another but, if we are to be innovative, there can be no sacred cows. It may be that the way procurement teams operate is such an instance inasmuch as the operating model may benefit from change.

Certainly, with commodities (stationery, telecoms, etc.), we can apply some pretty standard measurements in terms of what is being solved and what is being sold.

But does the current economic landscape allow for this?

Uber has no cars whilst Airbnb has no rooms – yet one of the companies provides driving services and the other accommodation.

In the late 80s, I worked for a freight company and we had a preferred supplier for local taxi services that didn’t just take people to-and-fro but also carried some of the lighter parcels as it was quicker than processing them through the depots and sorting office. How would this work now when Uber has the capacity to provide the service, as long as all of their sub-contracted / zero-hours drivers do their part?

With more than 50 professional buying organisations, potential suppliers to public sector, for example, almost have to have a dedicated resource just for the monitoring and management of tenders. So a framework agreement may save an organisation time and money – but what about the suppliers having to track different sources? Maybe (and this is just a thought) organisations feel that they are doing suppliers a favour by awarding work rather than accepting that the relationship is equal?

In a recent delivery meeting, the client team spent an entire meeting discussing which framework agreement they needed to access in order to deal with their chosen supplier. A discussion then followed about how they may be paying more for a specific framework but it was OK as long as it gave them the supplier they wanted.

When working at Tribal Group, I saw how much time, resource (and money) was spent on tenders – and it wasn’t until almost a decade after formation that there was a focus on bid / no-bid reviews. Within three months, the amount of tenders had gone done but the level of success had risen.

There were many times where an individual consultant was needed but, as a framework agreement was in place, the client would be paying high-end management consultancy fees with almost 50% of the margin being paid to the talent doing the delivery. But it was OK for the UK public sector to pay over-the-odds, because it complied with the framework.

I was speaking to an Associate in December 2016 – someone highly regarded in local government with extremely impressive credentials – and she was bemoaning the fact that, while public sector organisations talk about their desire to nurture startups and SMEs, the reality is that procurement frameworks are more of a blocker than an enabler. If the public sector wants to work with this person, they have to pay extra to a ‘preferred supplier’ for the privilege.

When did this become logical?

Can technology help procurement frameworks become better-for-purpose?A conversation with a Partner in Denmark in January 2017 introduced a new approach: a technology platform for large corporations to access individual consultants. To be a supplier to the platform, each independent consultant is vetted and qualified.

For one-off, quick-hit projects below a threshold, rather than refer to the consultancies who could afford to go through the tender process, each client organisation has an option to post their engagement / project on the platform and the qualified consultants have the option to pitch for the work (akin to a procurement framework mini-competition).

Risk is managed, contracts are managed, financing is managed.

Yet, at the same time that this is taking place, I have been working on a retainer with a local council who has to put work out to tender if they hit a £10,000 threshold. The timescale for the mini-competition to award the next £10,000 is over 2 months which delays delivery and consumes the time of all parties.

The Denmark model is interesting as IR35 reforms come into play – whilst there seems to be scaremongering about its impact on the UK economy (“failure to comply presents serious risks to your organisation: you could be face rate increases, claims for employment and workers’ rights or see your highly skilled resources leave the public sector altogether” – same as it ever was, people!).

IR35 has been a topic of discussion since 1999 and it has always been about self-determination and replaceability (the person delivering work could be offsite and a replacement provided). Equally, if the person working as a freelance resource is basically, doing the full-time job of an employee, then they can’t really be considered to be a contractor.

Personally, IR35 doesn’t affect me – the main complaints seem to be from freelancers who have been working long-term on a client site in one fixed role – they’ve been on to a good thing!

Maybe the Denmark model is a way to work with IR35 – ensuring that there are rules in the platform as from 6th April 2017 so that hiring organisations responsible for evaluating the IR35 status of all limited company contractors can provide a timestamped assessment and sign-off. And as it supports the IR35 ruling, it also opens up access to a highly-qualified professional resource pool without the restrictions and workarounds of old-style procurement frameworks.

The old arguments for a framework agreement (fast access to approved organisations, reduction in procurement timescales, reduction in procurement costs) may work for pens and paperclips – but if your organisation is trumpeting the fact that you’re ‘different’, ‘innovative’ and your issues are ‘unique to us’… how can you know that a framework that you’re only halfway through is still fit-for-purpose?

I’m sure that there are many viewpoints and angles to this – feel free to contact me and we can chat.

Are Framework Agreements relevant?