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Selecting the right procurement approach
The design of a public procurement process can limit or facilitate the application of Open SPP practices. In this section we include approaches to procurement that can be useful to introduce Open SPP practices. Procuring agencies should openly communicate, for each procurement process, which of these approaches will be taken, and how they are underpinned by the Open SPP enabling framework.
Outcome-based procurement
Outcome-based procurement can be another way to start implementing SPP. Applying an outcome-based procurement approach consists in framing purchasing needs in terms of the outcome that should be achieved, rather than how to achieve that outcome, allowing the supplier market to offer different solutions.
When you decide to use outcome-based procurement approaches, this can result in two main benefits:
- Focusing on real needs
- Promoting innovation
By framing needs in terms of outcomes (e.g. need for a patient entertainment system in a health facility) instead of specific needs (e.g. television units), public authorities open up the option of considering different ways to meet the identified needs. Some of the proposed solutions from suppliers might respond better to the needs identified than the specific options that could be considered.
Framing needs in terms of outcomes encourages the supplier market to develop and come up with different solutions.
To apply and outcome-based procurement approach, you need to:
- Frame your needs in terms of outcomes (see section on needs assessment for more information on this).
- Once you have a clear statement of user needs, you can consider different ways to run a tender. For outcome-based procurement it can be useful to implement two stage tender processes (see section below).
- Finally, you can consider establishing sustainability outcome targets throughout the duration of the contract (see more information on setting continuous improvement clauses on this section).
Outcome-based procurement approaches can be most useful when:
- You are unsure of the sustainable options available in the market.
- There are multiple ways of delivering on the vision that you have for the contract.
- There are less well established industry sustainability standards for the product, service, or works you want to procure.
- People are hesitant to try something new, but open to testing something out before fully committing.
Two-stage tender processes
Using two-stage procurement procedures, entails the possibility of establishing an ongoing dialogue, and openly disclosing information, between suppliers and procurement practitioners.
There are different benefits of using two-stage tender processes when implementing Open SPP, below we include four.
- It allows the procurement authority to engage with suppliers before drafting final specifications. This will ensure that sustainability requirements better respond to existing market capability.
- It incentivizes collaboration between the supplier and the procurement authority, but also facilitates integrating members from the supply chain early on in the process.
- It incentivizes the suggestion of innovative solutions from suppliers.
- It increases the chances of finding the best solution for identified needs.
- Allows SMEs an entry point to working with government.
- Step 1: Publish a contract notice and decide evaluation criteria for the Pre-qualification questionnaire (PQQ) phase.
- Step 2: Select the first round of suppliers based on a PQQ with specific questions.
- Step 3: Engage in dialogue with suppliers, and bring in more stakeholders from the supply chain.
- Step 4: Draft tender specifications based on dialogue with suppliers to select the final solutions.
- Step 5: Candidates submit their final tenders.
- Step 6: Evaluate tenders and award the contract to the selected supplier.
Using two-stage tender processes can be especially useful in complex projects such as construction procurement. It can also be useful when there are less well established industry sustainability standards for a specific service, product, or work.
Joint procurement
One of the procurement approaches that you can take within SPP implementation is joint procurement. This approach refers to the collaboration of multiple public authorities on a specific procurement. This collaboration can include jointly conducting early-stage market testing and engagement at the beginning of a procurement, or jointly tendering or contracting with a supplier, during the execution of a procurement.
There are different benefits of using joint procurement when implementing Open SPP, these include:
- Collectively leveraging purchasing power to achieve economies of scale.
- Fewer duplicated procurements, enabling public authorities to save unnecessary resource use.
- Standardizing and aligning sustainability practices.
- Increasing the number of interested suppliers. It offers the opportunity to get business from more than one authority; it is if lower effort to respond to a tender that may lead to more business.
- Step 1: Share your procurement needs or roadmaps with other procurement authorities. Communicate your procurement pipeline, and set a clear communication channel amongst public authorities.
- Step 2: Define group governance and leadership. Decide whether to work together jointly as a partnership or give an authority the leading role.
- Step 3: Agree on similar specifications and contracting approaches.
- Step 4: Engage with the market together.
- Step 5: Consider using individual contracts (collaborate to share best practice when evaluating suppliers, or set up a joint contract (joint tendering process, including the evaluation of suppliers).
- Joint procurement can be most useful when implementing sustainable procurement for the first time, leveraging the experience of more than one procurement authority to come up with consistent and standardized practices (even if they decide to publish individual contracts).
- Joint procurement can also be useful when procurement needs are the same, helping to save resources. This can be especially useful for smaller authorities with fewer resources, or smaller contracts.
In 2015, Wichita, the largest city in the U.S. state of Kansas, aimed to improve the quality of the city’s parks while reducing costs. At the time, grounds maintenance bid amounts were up 30 percent over the prior year, contractors were not meeting quality standards, and City officials were receiving complaints regarding the height of the grass on playgrounds and playing fields.
With help from the Harvard Government Performance Lab, the city created a data collection tool which inspectors could use in the field to track performance on key indicators (including grass height, prevalence of weeds and property damage). They then conducted a competitive procurement where, for the first time, the City considered factors such as past performance and ability to report on key metrics as part of the vendor selection. The Purchasing Department also divided large land areas into smaller parcels, and reached out to vendors that had not previously bid on the City’s contracts. The new contracts replaced punitive damages for under-performance with a 5 percent performance bonus to incentivize strong performance. Vendors submitted invoices with pictures of the completed work. This eliminated the need for City staff to perform on-site inspections.
With this approach, the city boosted overall competition (the number of vendors submitting responses rose by 38 percent) without raising the costs. What is more important, complaints to the City Manager about grounds maintenance fell substantially.