Posted: May 29, 2014 - 10:10 am
The increasingly complicated nature of tendering for contracts is preventing housing associations and local authorities from reviewing and procuring new services, due to the high financial and time costs associated with completing a full tender process, according to new research.
The findings, compiled by payment collection specialists, all pay in partnership with Consortium Procurement, are part of a major research campaign into service contracts, carried out across a sample of over 100 different housing professionals in the UK.
According to the research, a third of all participants (32 per cent) believe the tender for service contracts is the most challenging element during the review process. As such, 7 in 10 associations (67 per cent) planned to switch fewer than five services in the next 12 months.
Pierre Galeon, Commercial and Corporate Development Director at allpay, commented:
“The long standing complications of tendering for services are well documented – time-length and cost, administrative issues, the need for OJEU compliance, and the overall management process rightly takes its toll on the public sector.
“The research clearly indicates that housing authorities are increasingly reluctant to engage in reviewing their existing service provider contracts. This could not only mean that budgets take a big hit, but the end users – the residents – could be negatively impacted, both in their pockets and through the quality of service that they receive,” he said.
In light of the findings, Galeon suggests that public sector departments should look at alternatives to the traditional tender process when identifying a new service provider.
“This problem is not unique to housing, but it does have the potential to create a vendor lock-in market dominated by a core selection of service providers. Housing associations and local authorities should look to alternative means as to how to review existing service contracts. One such alternative is a framework agreement.”
According to the research, just a quarter (27 per cent) of the sample of housing associations had assessed the market for new service providers via a framework agreement, compared to a tender process, which accounts for almost 7 in 10 (67 per cent). allpay and Consortium Procurement are saving more than 100 housing associations and local authorities nearly £8,000 a year on average through the Consortium’s bill payment framework, allowing authorities to call-off the framework for payment collection services.
Framework agreements are commonly set up to cover things like office supplies, IT equipment, payment services, repair and maintenance services etc. If the framework agreement is awarded to one provider, then the purchasing authority can simply call-off the requirement from the successful supplier as and when it is needed without the costs and time of going to tender.
As the framework has already been advertised in OJEU and follows all the usual EU procedures and rules, housing associations and local authorities avoid any legal challenges arising from non-compliance that can commonly arise through tender exercises.
“The research strongly suggests that public sector departments might not be in possession of all the options available to them when it comes to reviewing service contracts. The fact that only a minority had turned to framework agreements, when there are clearly concerns around completing tender processes, is indicative of a lack of awareness. It’s imperative that service providers work alongside public sector departments to address these concerns,” concluded Galeon.
These thoughts were mirrored by Tracy Harrison, Commercial Director of the Northern Housing Consortium:
“We were surprised to see such a large proportion respond that they are still going out to tender themselves, rather than opting for the low-hassle, low-risk route offered by frameworks. That is something we expect to see changing quite significantly over the next couple of years, as more and more organisations realise the flexibility and the benefits frameworks can offer.”