In the 1970s, consumers found themselves caught up in a ‘format war’ – the battle for supremacy between electronic companies to produce the market-leading videotape recording system.
In the end, the market was narrowed to two choices – Betamax or VHS and consumers who had opted for Betamax quickly found the only place for it was the scrapheap.
What has this mini trip through history got to do with services procurement? It’s simple. Procurement professionals and commissioners of complex services are rapidly facing a time when they will reach their own Betamax/VHS moment. Do they continue ad infinitum with the primary contractor-managed services model to buy these services or do they consider another way – the dynamic purchasing system (DPS)?
Let’s look at the evidence. In the services procurement categories, frameworks reduce the supplier base in a four-yearly procurement exercise that restricts ongoing competition and, taken to the extreme, relies on prices and quality levels set three years and 364 days previously. Small businesses find it hard to compete in bureaucratic and time-consuming procurement exercises; equally they often find it difficult to quote four-year fixed prices.
This brings me to another point, one that is extremely topical. Three of the biggest issues on the government agenda are localism, inclusion of SMEs and collaboration. Managed services frameworks may not be fully geared to support any of these agendas. In fact, in the context of procurement of complex services, they’re actually competing agendas.
In direct contrast with this, a DPS doesn’t restrict competition – and widening the competition breeds price reductions and quality increases. Localism can be encouraged and nurtured using a dynamic purchasing system and SMEs – and, indeed, micro businesses – aren’t excluded from competing for contracts. The day-to-day buying process of a DPS drives price and quality in a way that collective buying through a managed services framework doesn’t.
Finally, current government legislation such as the personalisation agenda (Putting Patients First
and the 2010 White paper Liberating the NHS
which moves to GP Consortia) is also placing far greater emphasis on non-procurement professionals taking on more responsibility for day-to-day purchasing decisions. For those ‘amateur’ buyers, a DPS is the answer.
☛ Julian Young is CEO of services procurement business Matrix SCM.