Vendor lock-in fears as complex tenders dissuade public sector from switching suppliers

4 June 2014

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4 June 2014 | Anna Scott

Increasingly complicated tendering processes are preventing housing associations and local authorities from procuring new services, research has found.

High financial costs, administrative and compliance issues and time spent on the overall management of the full tender process is deterring these public bodies from reviewing their current services and could create a vendor lock-in market, according to the survey from payment collection company allpay and Consortium Procurement.

A third (32 per cent) of 100 UK housing professionals polled believed tendering for service contracts is the most challenging element during the review process. As a result, 67 per cent of respondents said they planned to switch fewer than five services in the next year.

“The research clearly indicates that housing authorities are increasingly reluctant to engage in reviewing their existing service provider contracts,” said Pierre Galeon, allpay’s commercial and corporate development director.

“This could not only mean that budgets take a big hit, but the end users could be negatively impacted. The 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.”

Galeon said public sector departments should look at alternatives to the traditional tender process when identifying a new service provider, to avoid a limited number of suppliers monopolising the market. “One such alternative is a framework agreement,” he added.

Just 27 per cent of respondents had assessed the market for new service providers via a framework agreement, compared to 67 per cent using a tender process.

“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,” said Tracy Harrison, commercial director of the Northern Housing Consortium. “That is something we expect to see changing quite significantly over the next couple of years.”

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