What is a Procurement Framework?

When it comes to procurement strategies, there are many different ways to get goods and services for the costs and benefits that a public sector organisation is looking for. One of the most utilised methods is a procurement framework (or public sector framework). Over the course of this guide, we are going to take a closer look at what a public sector procurement framework is, how they work and finally their advantages and disadvantages.

This guide will help those looking to further understand the principles of a procurement framework and how they differ from agreements/contracts and e dynamic purchasing systems, which many procurement professionals will be aware of.

eXceeding is a procurement consultancy that was founded on the principle of providing impartial, best practice, procurement advice to organisations of all shapes and sizes. Working with both the public and private sector, eXceeding has years of experience in delivering procurement solutions to both the private and public sector.

What is Procurement?

Procurement is a defined structure, method and technique used by organisations to streamline their purchasing processes of services, goods and materials, whilst reducing costs, establishing relationships with suppliers and improving time efficiency in the process. Procurement can be direct, indirect, reactive, or proactive in nature.

The procurement process involves:

1. Identifying customer and supplier requirements.
2. Choosing the right tools and processes to communicate with suppliers.
3. Defining the procurement process to be used.
4. Getting together the specification for the procurement.
5. Setting policies for evaluating proposals, quotes, and suppliers.
6. Having a negotiation strategy plan.

Procurement is a strategic enabler for many, if not all, industries and its importance cannot be underestimated. Careful management of the procurement process ensures that all goods, works and services are properly acquired so that projects and processes can proceed efficiently and successfully.

Public sector procurement is no different and is governed by rules and procurement laws which must be strictly adhered to. Public procurement law regulates the purchasing by public sector bodies and certain utility sector bodies of contracts for goods, works or services.

There are many different rules that public sector organisations must follow in order to submit applications for public procurement contracts. Many of which can be found in this government guideline from the gov.uk website.

What is a Procurement Framework?

A procurement framework (or more commonly known as a Public Sector Framework Agreement) is an agreement where the buyer selects suppliers whilst also setting the terms, prices and conditions for a period of time in advance – sometimes up to 4 years in the future. The buyer will then call on the suppliers to deliver the specified goods/services when required. In order to have a procurement framework established, a full tendering process must be implemented.

Framework Agreements establish the trading relationship between a buyer and multiple suppliers without any specific guarantee of work. They are increasingly important in public sector procurement as they can fix costs years in advance and for the suppliers it is a clear indication that any awarding of contracts is based on the ability to be a key player in the industry.

What is a Neutral Vendor Framework?

A Neutral Vendor Framework Solution also acts as a conduit between contracting authorities and pre-qualified suppliers, but the big difference from a fixed Public Sector Framework Agreement is it offers a marketplace that suppliers can join at any time. Public sector organisations have transacted through this framework model for nearly 10 years and it has proven to increase the supplier choice available to organisations, as well as support social value supplier initiatives.

Awards can be direct, via mini-competition or through full sourcing events and allows buyers to move much quicker than average procurement timescales.

How do Procurement Framework Agreements work?

Framework agreements are between suppliers and buyers and work differently for both parties.

For suppliers, a framework agreement is a way to expand opportunities that they are not taking advantage of. A framework agreement is a great way to participate in public sector (as well as private sector) contracts where the framework is divided into specialist or geographical areas. Whilst there is no guarantee that there will be work from being selected, for a supplier, being chosen can be a moment of recognition within the industry and equally, help smaller suppliers work with high-profile buyers.

For buyers, a procurement framework is ideal to save time and money constantly selecting suppliers when issuing tenders for the same goods, works or services. Multiple buyers can benefit from using the same framework where this is managed by one buying authority. This helps with delivering on economies of scale, reduced admin and consequent savings.

Difference between Framework Agreements and Contracts

The major difference between a framework agreement and a contract is that an agreement is no guarantee of work after a supplier has been selected. In a contract, once bidders are selected, the winning bidder(s) will undertake the supply, works or services that the authority requires.

In a framework agreement, there is no guarantee of work – it is simply an agreement about the terms and conditions that would apply to any contract awarded.

Framework Agreements vs Dynamic Purchasing Systems

Public sector organisations use both framework agreements and dynamic purchasing systems for goods, services and works. The main difference is that in a framework agreement, once the tendering process has been completed, no new suppliers can join the framework until it reopens. In a dynamic purchasing system, new suppliers can join at any time.

One major advantage of being included in a framework agreement is that a supplier can build a long term relationship with the buyer as most contracts are awarded up to 4 years duration. This presents many new opportunities to the supplier throughout the term of the agreement.

Procurement Framework Agreement Advantages

Naturally with any kind of process managed system there will be associated advantages. For a framework agreement, several benefits include;

• Reducing overall procurement costs.
• Freeing up of internal resources – not everyone is constantly involved in the tendering process.
• Developing long term relationships between buyers and suppliers.
• Creating long term value for both buyers and suppliers.
• Finding solutions that satisfy customers through different suppliers.
• Developing best practice techniques.
• Capturing new knowledge from suppliers.
• Gaining knowledge of procurement practices with government efficiency agendas and expectations of auditing bodies.

Procurement Framework Agreement Disadvantages

However, with any kind of process managed system there will also be associated disadvantages. For a framework agreement, several disadvantages include;

• There is no guarantee that there will be any work once being selected – for many smaller businesses this can be a lifeline not utilised.
• Can distract supplier businesses from their main work if they are too focused on the framework agreement.
• Suppliers will need to network/market their services to be considered for work even though they are on the framework agreement.
• For buyers, these agreements are long term in nature and managing a supplier over that time can be difficult – especially if the relationship breaks down.
• Restricts new suppliers being selected who can provide innovative services, ideas and solutions with changing technologies and best practices.

In Summary

A procurement framework (or more commonly known as a Public Sector Framework Agreement) is an agreement where the buyer selects suppliers whilst also setting the terms, prices and conditions for a period of time in advance – sometimes up to 4 years in the future.

These agreements are designed to help contracting authorities and public sector bodies have a list of chosen suppliers who can meet their needs and develop a long term relationship at the same time. There are both advantages and disadvantages to this form of agreement where both parties need to weigh up if an alternative arrangement such as a Dynamic Purchasing System may better suit their needs.

Understanding procurement in today’s world is critical for business success. With global supply chains experiencing difficulties and the issues that organisations face with political uncertainty, having an experienced consultancy like eXceeding to help in your procurement requirements is an advantage.

At eXceeding we can help businesses get to grips with their procurement processes and create a strategy that suits them to deliver not only cost savings but also a streamlined process, saving time and reducing human error in this field. With over a decade of experience and helping public sector organisations such as Cambridge University Hospitals, Kingsdale Foundation School, Royal Borough of Kensington & Chelsea and Origin Housing  improve their procurement strategies, why not drop us a line to see how we can help you achieve your goals.

Contact us for more information about public sector procurement and how we can help deliver value to your organisation.