This article is part of a series about large-scale, collective, public-sector procurement. It is written mainly for the people responsible for these procurements. The overall aim of the series is to describe the obstacles in the way, and show how to overcome them. It uses laptops as an example, but the same ideas could apply to other categories.
A previous article set out the scaffolding of the topic, in six parts. This part is the last: about the organisation needed to carry out a large-scale collective procurement in the public sector. It comes after we consider the technical requirements, user needs, rules of the game and economic case. So all the components are assembled but we need the organisational structure to make it come together successfully.
From the previous articles, we can draw out the following design principles for the way the procurements are organised:
- The contracting authority must be capable of conducting an efficient and effective collective procurement
- The organisations whose user needs are to be met must retain collective control of the authority
- We need a specialist body to develop and maintain the expert technical knowledge required to specify requirements
- The overall arrangement must be attractive to organisations of different types and sizes, in order to secure the largest volume of participation.
To obtain the most favourable terms from a supplier, the collective contracting authority must be able to provide assurance that a large volume will flow through the contract. This could be a guaranteed minimum volume. But, if it cannot do this, the result is likely to be a catalogue price rather than a best price.
To have a guaranteed minimum volume, the contracting authority must have a binding arrangement with its participating organisations to obtain those goods or services through the authority. This is not a framework agreement or a marketplace. The contracting authority awards a contract to supply a minimum volume at an agreed price over a defined period.
In this scenario the contracting authority acts as a co-operative. To ensure the participating organisations, or members, retain full control, the co-operative needs to have a constitution whereby the members delegate certain powers to it, and provide the financial assurances. The co-operative executes the procurement and manages performance of the contract, only within the terms of its delegated powers.
As in a co-operative, organisations participate as members under the terms of its constitution. These determine who is eligible; what they commit to; and what voting rights they have.
This co-operative will publish requirements in procurement documents that will be open to inspection by the whole world. As a result, the technical requirements will need to be based on a) world-class technical knowledge, and b) user research. My preference is to create an independent body to supply these two: in the form of a technical institute.
Why do we need an institute, and not just a few technical people to write the requirements? To perform its function, the institute needs to have:
- A deep understanding of existing international standards and certifications
- An ability to develop a standard or a specification, and a verification method, where it does not already exist
- A testing facility for new products
- A user research capability
- Engagement with suppliers
- Continuity as goods and services change.
In some ways, this is a mirror of the research and development capability of the suppliers. The institute can work closely with suppliers to develop its knowledge. At the same time, the institute can provide a training facility for young people entering the profession. I can’t think of a better way of developing strong technical skills than disassembling products and researching how they are used. If we extend the same principles to other fields, then we might have a technical institute with faculties for different subject matter, like a university.
One of the problems for the co-operative procurement organisation is how to secure participation by larger organisations. There is a risk that those organisations would choose to retain their autonomy in preference to any advantage they might gain by participating. Without the larger volumes, the co-operative would not be able to secure more favourable terms than the large organisations alone. This in turn would confirm their choice not to participate.
A possible, or partial, solution to this lies in the publication of standard technical definitions by the institute. If these are clearly the most expert way to express requirements, then the larger organisations should choose to use them too. If they use them in their own procurement, the technical arguments for doing something different are much reduced. Once these conditions exist, it would be reasonable for a government to expect large organisations to procure co-operatively, without going as far as an explicit compulsion.
People sometimes circle round the question of compulsion. If the largest procurements achieve the most favourable terms, why not compel public sector organisations to participate? There are several objections to this:
- Genuine differences, for example in their existing estates
- The risk that, without an alternative, the procurement organisation becomes unresponsive to its members
- A conflict with organisational autonomy and accountability
- The possibility, unknown until tried, that economies of scale might tail off.
I prefer the approach of using a co-operative procurement authority, with independent technical standards, and a strong policy expectation of participation by organisations of all sizes and types.
I started this series of articles by saying that a large-scale collective public-sector procurement was not as straightforward as it might appear. I divided the problem into six topics. This one is the last: how to organise it. The next step is to try.