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12 December 2011 | Angeline Albert
Wider use of payment by results by public buyers
is needed to “get procurement right”, say businesses that have compiled a guide
The Confederation of British Industry (CBI), which represents
around 240,000 UK businesses, said effective public sector procurement to
ensure every taxpayer pound is well spent requires the expansion of both outcome-based
commissioning and payment-by-results.
This recommendation is one of seven
suggested in the CBI’s Procurement Reform Proposals
document, published today.
The report said outcome-based commissioning
would stimulate new ideas from suppliers, forcing them to consider new
approaches. Contracts are “often over-specified and input-based in a way that
requires extensive oversight of processes and restricts the ability of
suppliers to deliver innovative new approaches”.
The CBI praised the Ministry of Justice’s payment-by-results contract with Serco,
which requires the supplier to deliver a 5 per cent reduction in reconviction
rates among offenders released from HMP Doncaster every year. If this is not
achieved, 10 per cent of Serco’s expected annual revenue from the contract will
not be paid.
Among the other recommendations made by the
business group was that the value-for-money assessment of bids must be improved,
with whole-life costing rather than lowest price considered across the public
sector as the basis of buying decisions.
The CBI also called for the simplification
of EU procurement directives and for better implementation of these rules by
buyers to avoid “gold-plating” requirements and help speed up purchasing
processes. CBI members also said public buyers’ risk aversity led to the
over-use of the competitive dialogue process, when alternative processes could
Companies further urged the government to
improve buyers’ skills and transparency, which includes giving advance notice
of a purchase to allow for pre-tender dialogue.