E is for easier, not easy, in E-Procurement
Procurement Scotland was officially launched on 6th March 2008 by John Swinney, Cabinet Secretary for Finance and Sustainable Growth.
Having been established under its former guise as the National Procurement Centre of Expertise, Procurement Scotland has already proved its worth and benefits to the public sector and the UK tax payers through millions of pounds worth of savings:
"As a first demonstration of the work of Procurement Scotland, I welcome the substantial savings of up to 56% which will allow money to be reallocated to other priorities. But this is just the start." stated John Swinney.
A complex area, e-procurement is a process used to facilitate the tendering process for Contracting Authorities at the same time as complying with the EU rules on procurement and competition law.
Bringing the process into the 21st Century, Procurement Scotland uses concepts such as live reverse e-auctions through which prospective contractors can out-bid one another in order to win the tender. Economically beneficial to the Contracting Authority, e-auctions will see contactors under-cutting one another in order to win.
So, how does it work?
The usual EU procurement rules, stated within Directive 2004/18/EC, must be followed in that the tender notice must be published in the Official Journal of the European Union (OJEU). However, the Office of Government Commerce has stated that the notice must also contain the standard wording that: "The Contracting Authority intends to use an electronic reverse auction in this procurement exercise".
As with any tender, the contract award criteria (which can be either: (a) lowest price, or (b) "MEAT" [i.e. most economically advantageous tender] which can encompass many factors e.g. quality, timescale, health and safety, expertise, experience, cost etc) must be published in the notice. It is often the case with e-procurement that a copy of the notice will also appear on the Procurement Scotland website as well as any appropriate newspapers – publicity is the key to the uptake.
In the case of e-auctions and following the notice, prospective tenderers must then request a questionnaire which is used to help the Contracting Authority shortlist prospective suppliers.
After the appropriate time has lapsed, those shortlisted by the Contracting Authority can then commence the reverse e-auction. On completion of which, the Contracting Authority need not simply choose the lowest bid, as with any tender, the bids must be analysed and compared to the chosen contract award criteria.
It must be borne in mind, however, that e-auctions will only be appropriate in certain instances. An area where the e-auction could be very useful would be in a general construction contract as there are many contractors who would be able to tender. Using the MEAT criterion, the Contracting Authority could benefit hugely as the bidding war commences.
Conversely, if a tender can only attract a niche sector of contractors then a more appropriate tender process could be used to reap the best results. That process may be the Competitive Dialogue procedure which can be used where the contract is particularly complex rendering the Contracting Authority unable to define its technical specification without first discussing the project with prospective suppliers. In those circumstances, e-procurement would not be the most viable way of progressing.
Aside from the work needed to implement the method into your internal systems and although there are no transaction fees and no fees for suppliers, Contracting Authorities will need to consider the subscription and ongoing costs of the facility to determine whether or not e-procurement will be economically viable for them.
However, In instances where e-procurement is appropriate and cost-effective, it will be somewhat easier for Contracting Authorities to manage the tender process. In addition to the other facilities within the Procurement Scotland system (e.g. purchase 2 pay invoicing), through the electronic means, the tender timetable can be shortened, facilitating expediency.
Easier but not easy, the procurement process is still a complex area and both Contracting Authorities and tenderers should take professional advice to ensure that the tender process can run as smoothly, as quickly and as cost-efficiently as possible in terms of their differing interests.
For further information please contact: Stuart Macfarlane