The Competitive Flexible Procedure (CFP) in the UK’s Procurement Act 2023 has been presented as one of the biggest changes to UK public procurement in decades. But what does this mean for suppliers when it comes to winning work?
The basics of winning business remain the same, but buyers now have much more flexibility when it comes to two things: buying innovation and buying complex requirements.
The new procedure has been designed with the aim of simplification. What were several separate buying procedures from the past have been replaced with the CFP which is, put simply, a single, adaptable procedure that contracting authorities can use to design their specific procurement needs.
The menu of activities within the CFP that can be assembled when it comes to buying products are not new, and most suppliers will have first-hand experience or knowledge of them:
- supplier presentations
- demonstrations
- prototype testing
- interviews
- negotiations
- multiple bidding rounds
- down-selection stages
- clarification meetings
- innovation workshops
- proof of concept exercises
Given this menu is so familiar, it is reasonable to ask, ‘what has changed’. Many larger organisations, including arms-length bodies in rail, defence and infrastructure, were using many of the above by choosing the most suitable legal pathway to procure the services they wanted (e.g. an open procedure, restricted procedure, or competitive dialogue).
But the difference is best described by considering the aim of the buyer at the starting point of the procurement, where the past buying question changes from one about the choice of a small number of legal pathways:
“What procedure could we to use to award a contract?”
To one which can be designed by a contracting authority to:
“What do we need to know about the market and supplier solutions to award a contract?”
The Framework
There are four stages within the framework, but not all need to be used.
- Conditions of Participation Stage – where the tender notice sets out the requirements and process for participation, supplier assessment, and invitations of successful suppliers to the next stage.
- Design and Development – this is the most significant change when it comes to buying innovation. The procurement process can include iterative design, develop, and test phases to reduce the number of suppliers invited to tender to those with viable, and different, solutions.
- Tender Stage – which follows the familiar steps of issuing and invitation to tender, receiving tenders, and assessing tenders. For more complex projects, tender assessment might involve assessment of demonstrations and parallel negotiations with a shortlist of multiple suppliers, followed by a Best and Final Offer.
- Award stage – comprising the issue of supplier tender assessments, publishing an award notice, negotiating the final contract during a standstill and then, finally, awarding the contract.
Buying Innovation
The intention is that the CFP enables a shift from “funding innovation projects” towards “procuring innovation through a staged commercial pathway.”
A multistage competition for the design, development and purchase of innovative goods, works or services under one continuous process might look like the following:
The flexibility to include a design and development stage as part of the procurement exercise allows the buyer to learn about the options before issuing the invitation to tender.
This sounds like great news and something that suppliers bringing new products and services to market have been wanting for a long time. It provides an opportunity for buyers of novel or complex solutions to fund suppliers during the design, development, prototyping and testing.
But it comes with three supplier warnings:
- There is no formal requirement for any design and development costs incurred during the procurement process to be paid for by the client. Buyer funding of supplier design development, testing and prototyping costs might be nil. If no funding is available, what appears to be an innovation-enabling procurement that can open-up the market to spin-outs, startups and SMES, will favour larger companies that can afford to self-fund.
- Funding the development and testing does not guarantee a follow-up contract. Even with a clear commercial process offering a pathway to scale up, the buyer can stop the process at any time. Only time will tell if this is the best way of crossing the “innovation valley of death”, between a successful pilot or trial and first customer order.
- There is no stated position on Intellectual Property (IP). Buyers can, whether justified or not, seek to acquire IP exploitation rights within the Invitation to Tender, whether supplier funding has been provided or not.
So, despite the CFP providing the opportunity for more flexible procurement, the supplier may still end up incurring significant costs and having to make a case to not dilute the value of their foreground IP. Or, if they can afford neither, not participating.
Clients making bold statement about the use of the CFP does not mean they will design the best process.
Buying Complex Solutions
When it comes to complex high-value contracts, the CFP is probably best described as an evolution from current practice, not a revolutionary change. Many buyers were already making the most of the flexibility in the restrictive legal pathways.
A multistage competition for buying complex good, products and services, such as those associated with a systems integration or technology deployment programmes, might be based on the following:
This is a process that will already be familiar to many large 1st Tier suppliers. The flexibility within the CFP means the number and sequencing of activities within the tender stage can be tailored to the precise requirement rather than having to try and fit it into a legal-led procurement process.
In this case, the warnings to suppliers are more familiar:
- Supplier bidding costs may well still be high. More activities might lead to a better buying decision, but suppliers may encounter greater bidding costs and longer procurement processes.
- A poorly written specification, biased towards input requirements rather than use-cases, outputs and outcomes, will lead to downstream problems during contract negotiation and contract delivery. For example, a failure to include interoperability outcomes may lead to supplier lock-in for many years due to high supplier-switching costs.
- Selecting the “best supplier and solution” at the point of procurement, does not guarantee successful contract delivery. It may increase the chances of success, but the risk of long-tail cost escalation on complex projects remains significant. If the supplier assessment criteria contain the same flaws (e.g. an over-emphasis on cost estimation over experience, planning, programme management capability and risk management, etc.), the supplier selection outcomes will be the same. More information and increased engagement might not lead to the best outcome at the end of a contract.
Buyer Guidance
Bringing innovations to market and buying complex solutions is problematical. The very best procurement process may still not deliver the intended contract outcomes. So what do buyers need to do?
The government guidance suggests the following tips for buyers:
- Consider the requirements and what outcome needs to be achieved – this should drive the design of the process
- Design a process that is proportionate to the requirement and will encourage suppliers to participate
- Be mindful of the associated costs and resources on both the contracting authority and suppliers
- Preliminary market engagement is recommended to set the context of the procurement, the objectives and explain how the process is intended to run to obtain feedback from suppliers
- Focus on functional or output based specifications and consider allowing for more innovative solutions to be proposed
- Make use of commercial skills – contracting authorities now have the ability to use a variety of tools within a competitive procedure to get to the best outcome or solution.
Summary
The Competitive Flexible Procedure in the UK’s Procurement Act 2023 is not a silver bullet. It provides an opportunity to make better procurement decisions, but this is far from guaranteed.
The most significant factor that will determine its success will be how it is applied by people.
If client and supplier behaviours and capabilities remain unchanged, and opportunities to change culture are overlooked, there will be inconsequential or no change of state from today’s system interactions between people, process, technology and culture.
This is the greatest threat to success, and the most overlooked. The many workshops, seminars and training events focus on the technical aspects, without any reference to making systems change.
To deliver success, a shift in mindset and a systems perspective will be needed by both clients and suppliers.
Reference: Guidance, Module 4: Competitive flexible procedure, Published 22 April 2024
