Having been involved in establishing public sector energy supply contracts for almost two decades, we have seen over the last ten years the proliferation of Framework Agreements , particularly in recent years as a number of public and quasi-public sector bodies have sought to control the public sector at large. Unfortunately, this has often only been seen to stifle a competitive public sector energy supply market by creating monolithic single supplier agreements and the formation of basket arrangements, which, while perhaps relevant some years ago, serve only their masters today.
Early adopters of energy Framework Agreements c2006 and those of us who encouraged our public sector partners to take this route to market did so because we recognised a significant issue for tendering electricity and gas supply contracts, created by the outcome of a legal challenge. The question was asked: how can we have a ten-day Standstill period (the outcome) in which we are unable to secure the commodity element of cost following contract award? A competitive Framework Agreement solution, where the agreement itself accounts for this period, has enabled clients to use the mini-competition process to invite included suppliers to tender, and, following this, to close, award, and agree a contract on the same day. For those of us who recognised the issue and understood the rules, it was the only logical approach – problem solved! However, there remains the drawback that such arrangements preclude the participation of any new supplier or existing energy supplier not awarded as a party to the agreement from the outset. Single supplier agreements only serve to remove free will and competition from the market for extended periods. The supposed benefits have not been evidenced.
With the update to EU Procurement Rules last year and until such time as the UK decides its post-Brexit future, changes to the rules have seen what will most likely become Framework 2.0. However, many have not observed this subtle yet significant change and what it means for public sector energy procurement. The previously and invariably ignored process of Dynamic Purchasing Systems (DPS) will come to the fore. The DPS process, which has to be managed electronically, is now very much in essence a Framework Agreement, but with significant advantages for public sector bodies who are looking to actively encourage energy supply competition, as well as transparency of charges and performance. It will be an important element of any step change in procurement for public authorities looking to take control of their energy strategy and spend.
The advantages of a DPS over a Framework Agreement are that it has all of the advantages of a Framework Agreement but in addition offers:
- A more competitive environment, being open to new entrants for the entire period of operation
- Less administration and therefore less cost to buyers and suppliers, for greater engagement
- More flexible procurement – the advantages of an agreed OJEU compliant structure for tendering but with the flexibility to account for individual organisation’s requirements
- A longer timeframe of operation and so a further saving on the unnecessary cost and administration of retendering every four years
So if you’re looking at securing contracts in the near term, talk to us about DPS and take back control of your budget.
Written By – Nick Barrance
