The new public sector Procurement Bill – Increased transparency, but at what cost?

Enhanced transparency requirements are a key feature of the new public sector Procurement Bill and this will have a significant impact on day-to-day procurement activities. Some examples
include requirements for:

• a central online transparency platform that will allow suppliers to access public procurement data. This will most likely be developed and supported by a central government organisation, with each contracting authority able to grant suppliers access to the procurement data they provide via the transparency platform;
• publications of numerous notices throughout the procurement process, including a requirement to publish contract award notices prior to entering any relevant contract;
• publishing contractually agreed key performance indicators for each contract; and
• publishing notices for large procurements (over £5m) a year before they are due to be tendered.

What does this mean for procurement people?

This heightened transparency will place a heavy load on all aspects and people involved in Procurement, from governance and control, to staffing, processes, procedures, and systems.

Procurement teams will find having up-to-date and accurate data essential and Will need to develop new processes to track contract spend across the organisation, ensuring compliance with transparency related notices and monitoring financial limits. Procurement teams will need to take the below actions.

• Keep track of all third-party spend on contracts, especially where their values increase over their life cycle. When a contract reaches a £2m lifecycle cost it must be added to published procurement pipelines. This applies for organisations that spend more than £100m a year.
• Have accurate and up-to-date procurement pipelines, to give the market the requisite one year notice ahead of large procurements (£5m).
• Assess the contract performance of the relevant suppliers against published key performance indicators. If the supplier failure meets the threshold for debarment, further disclosure and documentation will be required.
• Publish contract change notices before contract changes are implemented and contract award notices prior to entering any relevant contract. Both activities will add time to the procurement lifecycle as well as increase public scrutiny on procurement activity and contracts.

Staff across the organisation

Procurement teams will need to engage staff and contract managers in designing the processes, associated document sets and systems required, to ensure the appropriate triggers are in place to adhere to the many transparency requirements.

Given the risks involved in getting things wrong, there must be checks and balances and appropriate governance in place to ensure the information published is up to date and accurate. For example, staff involved providing supplier performance feedback as part of routine supplier relationship management may well experience much more robust responses from suppliers, given that the new Procurement Act will mandate the publication of details of procurement and contract performance in the public domain. Supplier organisations and contracting authorities should also carefully consider the reputational impact of published information.

There will be other knock-on effects on all employees involved in procurement and contract management, as the new act will not be only for  procurement teams. People responsible for managing contracts across public sector organisations will need to stay up to speed with the new requirements mandated in the bill and receive training to ensure they understand any new contract management requirements and can apply them properly.

The collection and management, as well as the publication of procurement information, will require additional time and resource; potentially making procurement more expensive and time consuming overall.

Top of the office

Finance directors and business leaders who have accountability for procurement are likely to face a new area of risk as a result of having to comply with greater transparency requirements. They will have a key leadership role in ensuring processes, controls and governance are up to date prior to the new bill. Areas to think about and plan for include:

• the exposure of weaknesses in internal procurement and contract management practices as a result of publishing data and information on procurement and contract management; 
• investment in training and additional resources to prepare staff for the new act; and
• assessing whether your internal governance around procurement and contract management can cope with transparency requirements.

To learn more about preparing your organisation for the new public sector Procurement Bill, contact Walter Akers, Partner RSM.