Unlock the potential of market engagement

The concept of communication as being a successful project driver is not new - and in fact “tender” itself derived from Latin origins as “the creation of an offer from one party to another….” so it's easy to see just how vital market engagement is as a means of achieving procurement outcomes.

Innovation and choice

Market engagement has many benefits including the creation of innovation and choice.

Engagement to understand the current state of the play is essential for the creation of a viable and detailed specification. Even if the procurement process is often repeated and the market well known to the buyer, the needs of the communities we serve do not stop changing and neither should our learning.

However, it’s not just about what the market can offer you, but also about what you need from the market. Supplier engagement where loud and consistent enough can easily become a productive method for shaping the market itself. Giving voice to customer needs through market engagement opens the door to the art of the possible by indirectly inviting suppliers to recognise developing or changing customer demands and trends, which in turn helps the supplier market to identify gaps to fill. As they say, “necessity is the mother of invention”.

In the case of early market engagement in particular, it also helps raise the profile of your procurement, encouraging competition and therefore competitive outcomes. From the other end, being aware of upcoming opportunities increases the available options too by giving the market time to prepare or set aside resources to create a tender when needed. This is of particular value when engaging SMEs and local supply chains.

Traditional approach to market engagement

Traditionally, fears of expensive formal legal challenges have created a risk adverse approach to procurement generally. Within that mindset, the public sector has been incredibly wary of market engagement, sometimes viewing it as a weak link in its legal framework; and this over time, generates concerns about when or how market engagement should and can take place, some of which persist today.

To help provide some clarity, in 2015, the Public Procurement Regulations were introduced which provided us clear guidance that market engagement is a viable tool for the public sector.

Market engagement although carrying many benefits, can also unduly influence the contracting authority into making a predetermined outcome, contrary to the intentions of open competition. Where pre-market engagement has the effect of giving a supplier an unfair advantage, the result should be disqualification from the competition. Perhaps we then see a limitation on market engagement created by the regulations. At risk of being disqualified from competing, where is the motive to encourage a supplier to explore what can be achieved if such research and engagement could be for nothing?

The purpose remains the same

We know these rules are soon to be replaced by the 2023 bill which is currently making its way through Parliament, close now to Royal Assent. Under the new rules, the rights embedded in the 2015 regulations will survive with some expansion.

The current draft tells us that preliminary market engagement will be permitted for a series of purposes, many for reasons as you might expect but all to create the benefits, we set out earlier. These are as follows:

• Developing the authority’s requirements and approach to the procurement
• Designing a procedure, conditions of participation or award criteria
• Preparing the tender notice and associated tender documents
• Identifying suppliers that may be able to supply the goods, services or works required
• Identifying likely contractual terms
• Building capacity among suppliers in relation to the contract being awarded.

Similar to the existing regulations, the new rules continue to make clear that such preliminary market engagement must not distort competition or put certain suppliers at an unfair advantage. So again it is possible that through an attempt to create fair and open competition, an unintended casualty could be public sector led innovation.

We have refreshed focuses

We have some simple tips to get started - and keep market engagement on the right side of the rules.

• Transparency is key. Be open and up front about what you’re hoping to achieve both in terms of the engagement and the end outputs and what you know about the associated elements, such as location of delivery or intended contract length or similar.
• Formulise the approach to the engagement in advance of the activity occurring, this will ensure a consistent approach if engagement take place face to face or over several sessions, making sure everyone gets the same information throughout the process.
• Make sure the conversations and engagements you have with stakeholders are undertaken in a formal enough setting to minute or capture in some way. Again, linked to transparency, it makes sure even those who were not able to get involved in the pre-market engagement can understand what was discussed and get a feel for what you’re looking for, ensuring everyone has equal opportunity to prepare.

This last point does come with a word of caution though. Be aware that alongside a drive for transparency, there should also be a respect for commercial confidentiality. In most engagements there may be elements of sharing intellectual property or commercially sensitive information.

Obviously, this should not be shared but it would be advisable for suppliers to set out where those lines should be drawn which such information being marked as confidential.

This should also give an indication to a buyer when creating a specification, where a requirement would be applicable only to specific suppliers to avoid claims of targeted specifications.

Value your suppliers

• Make sure that the engagement is proportionate to the requirement. Engagement relies heavily on suppliers investing time and possibly resources into your project with absolutely no guarantee of return. Some suppliers will also have more significant capacity and resource to engage than others.
• It’s important that the suppliers understand the rules you will be following during the engagement, that, if put at an unfair advantage they would be disqualified and also if doing so, your intent to publish the publishable elements of the engagement. This will allow them to make an informed decision about their involvement and hopefully also understand how the approach you take will also protect their own rights to compete in the eventual tender.

Beyond the preliminary stage

Up to this point, we’ve considered market engagement in a preliminary form only, but engagement does not stop once the tender is published. On the advent of the new regime, the opportunity presents itself for us to redefine what market engagement means for public procurement.

Routes to market

The existing routes to market do already include prescribed methods for mid tender engagement with competitive dialogue, competitive procedure with negotiation and the rarely used innovation partnerships presenting such opportunities, but these will be replaced with two competitive procurement routes and a third direct award option.

• Open procedure – This will be extremely familiar to procurement practitioners as well as suppliers. It’s the open route allowing a single stage open competition to award a contract.
• Competitive flexible procedure - This unlocks considerable potential around creation of tender opportunities, where you can create your own competitions, with various stages and formats, ultimately creating unlimited opportunity to make processes relevant, flexible and easier to use.
• Direct awards – The new rules will retain the ability to award some contracts without competition in limited, specific circumstances such as emergencies or where there is an overriding public interest in doing so.

Competitive flexible procedure

Of the routes available, the competitive flexible procedure really is a catalyst for unlocking procurement value and innovation.

The public sector has an opportunity to rethink current approaches and to encourage new ideas with this new route to market, which is driven by the increases in flexibility as to how market engagement can be delivered during the tender process.

Where its transparent and in line with the objectives and principles of public procurement, this could take any form but it will unleash the potential offered but never really grasped wholeheartedly by the current competitive procedures and innovation partnerships, to properly tailor the process to create the right outcome rather than settling to an outcome than will fit into the available process.

It’s in our gift

So, with no ground breaking or dramatic stipulations in place for pre-market engagement and some very clear and direct parallels between the current and new rules, are we at risk of doing what we’ve always done?

It’s a possibility, but it’s also a question that is within our gift to answer how we wish. The new Procurement Act does not just represent a move from European directives, but we must see it for what it could be if we want it- a fresh start and an opportunity for innovation.

In a time when public services are strained and resources stretched, now is the time to look beyond what we know and move into what could be, and market engagement is central to that evolution.

Net zero outcomes

For example, we see frequently increasing demand from our stakeholders for socially responsible and sustainable outcomes with a growing emphasis on net zero set within all of our own long-term plans but often, a significant shortfall or gap in how to actually achieve those objectives.

Those shortfalls are not attributable to any single factor but the most significant may be the lack of available solutions from our suppliers which itself, is driven by demand.

It’s unfair though to say that our suppliers are the cause. The private sector itself, is shifting towards sustainability and net zero but this is largely being driven by the stick that is legislation, such as for example the packaging regulations and ban on petrol cars from 2035.

Under the new regulations, we can use market engagement to introduce a carrot into that equation by making procurement about what we need to achieve, not what we must settle for due to the rigid nature of our processes. After all, if our demand is clear enough, somebody will spot that opportunity and create a solution.

Collaboration, not just competition

Even further than that, through market engagement procurements of the future can become collaborations just as much as competitions. By creating an environment within our procurements for suppliers to be encouraged to talk and work together to reach the solutions we need, not just to compete by offering what they already have.

Our suppliers in turn, can develop new partnerships, products, services, ideas that can be developed and taken to market and we have the means to start those conversations by revisiting what we know procurement to be and look at it from a different angle.

And from this, who knows what we could achieve? More efficient sources of energy generation, new sources of renewable or sustainable materials, process efficiencies by amalgamating the best practices of public service providers together.

And finally…

When it comes to market engagement, the new regulations provide us with options. We can continue to engage with markets as we already do. And we should not play down the suitability of that option in some cases. After all, we know that having the time and resource to develop innovative solutions is a challenge – and doing things differently also requires a shift in mindsets, practices, and behaviours.

We can also turn the page and re-think what we understand market engagement to be and what it can achieve and I’m excited to see what we can create under the new regime…within the scope of the rules of course.

Overall for us, market engagement does not stop with tendering or indeed the supply chain.

We would love a chance to hear what you think too and have a chat about all things reform and how YPO might be able to help you with your own procurement challenges. Email us at [email protected]