Supply Side
Single-Supplier Framework In London – Guaranteeing Value Will Not Be Easy

We picked up on a new UK public sector contract the other day, that raises some interesting issues going beyond the specific category, contracting authority or indeed country. It concerns a framework agreement put in place by three London boroughs to provide technology-related services. Here are the details as reported by Mobile News.

Pan-London agreement will see BT provide ICT and UC services to three boroughs in the capital.

BT has won a £200 million contract as the sole supplier to provide a range of ICT products and services under a new pan-London public sector procurement framework agreement.

Potential customers can choose from a number of products and services that includes local and wide area networking, cloud services, fixed and mobile telephony, unified communications and conferencing.

It is the latest of four frameworks established by the tri-borough, comprising the Royal Borough of Kensington and Chelsea, the London Borough of Hammersmith and Fulham and Westminster City Council.

So, what do we think about this? On the one hand, it is good to see local councils collaborating, although we’re not great believers in aggregation for aggregation’s sake. Our view is that economies of scale only exist in certain spend areas and to a certain point. However, when you have three councils that are physically so close, with a lot in common, then equally it does not make sense for each of them to be buying everything individually. On balance, this collaboration looks like a sensible approach.

But then we are back to a number of questions around the concept of “single supplier frameworks”. Most public sector frameworks are put in place with multiple providers, anything from two or three to dozens depending on the situation and spend category.  Then competition between some or all of those suppliers at the point of awarding the call-off (the actual commitment element of the contract) drives much of the value, as providers vie to win the actual definite work.

If there is only one supplier, then all the commercial elements need to be resolved when the framework is let, as there will be no further competitive process. But at that early stage, the contracting authority or authorities usually cannot commit to volumes, timescales or even the details of products or services to be ordered. That means the supplier generally does not offer the best possible terms.

There is also the issue of change in contracts of this nature over the time period of the contract. That is particularly important here when we are looking at a range of products and services that are rapidly changing and evolving. The IT and telecoms sectors are probably in a greater state of flux than pretty much any market. So the question is; even if the prices were competitive when the contract was put in place, will that be the case in 6, 12 or 18 months’ time?

That depends on what contractual provisions have been put in place with BT. Are benchmarking arrangements in place to make sure prices are competitive with the market at any point in time? What about “always best price” clauses (we want you to guarantee us the best price you are offering to any customer)?

The danger with frameworks like this is that they are put in place mainly just to simplify the transactional process, with little consideration of the vital commercial elements.  Colm O’Neill of BT said in the article that the “use and importance of the frameworks is growing as they are designed to streamline the buying process across the public sector as well as saving money by making the buying process less complex”.

He is correct of course, but the money saved “by making the buying process less complex ” is tiny compared with the commercial risk of paying 5, 10 or 20% over the market price by being locked into a single supplier. We’re not saying that this is the case here; but we would love to know from the Boroughs exactly how they are going to drive true value for money through this contract. At first sight, we’re not convinced of the merits of this approach, but we’d be happy to be proved wrong!