Could Online Exchanges Help Local Government – And Local Suppliers?

SUMMARY:

The London Borough of Haringey thinks its use of a so-say local government Dynamic Procurement System proves they can, boosting transparency and reach.

Businessman using social network © sdecoret - Fotolia.comBack when all this Internet malarkey got big, one of the big wins we were promised were incredibly efficient online supplier exchanges, where suppliers could bid and be evaluated with digital levels of efficiency and transparency.

That didn’t quite happen, at least in B2B (with some honourable exceptions). But 20+ years on from Netscape and all that, things may actually start to be happening on this front – and, perhaps surprisingly, it’s happening with some effect in local government procurement.

That’s in the shape of something called a DPS (Dynamic Procurement System). A relatively new concept in terms of the British Town Hall for sure, one DPS has been quietly making a real splash in one part of North London.

More specifically, at least £100m worth of goods and services will have been purchased this year through such a system – across nine categories of service, including care.

That’s not all. The body using this particular system also says it’s expanded its supply chain by at least 50% in some sectors, mainly in the shape of new SME bidders – and even better, it reckons local pricing has dropped in some business areas by between 5 and 11% as a direct result of so much being channeled down the DPS route.

We are trying to encourage more local SMEs to work with us, as it’s good for local growth and employment. And the more we can commission locally, the less pressure it puts on public services. For me, the DPS is a really good tool that makes my job a lot easier.

That’s the view of the public sector practitioner driving DPS adoption in his authority, Barry Phelps, Head of Procurement at the London Borough of Haringey Council.

Phelps and his team have been trying to do all this with adam, a UK SME that claims to be ‘revolutionising’ how local councils like Haringey procure social care, healthcare, education and transport and which was rated a ‘Cool Vendor’ by Gartner a couple of years back.

And, as we’ve said – the first results of all this hard work do look very promising. That matters, as Phelps is working in a context of pretty unforgiving significant financial pressures, and nowhere is this more true than in London, where prices of care, housing and transport services are rising faster than in the rest of the country, and the marketplace of providers of these services is limited. As Phelps states:

There are huge pressures financially throughout the public sector, but I think what people have struggled with is how to address those pressures and the shortfall. They may have tried a number of ways that have got them to their current position, but it’s what the next step is that’s the problem now.

Greater transparency

Haringey decided to get proactive and work with its supplier community to try and come up with a practical solution that would help both the council, the market, but most importantly the local economy and service users, too, he says.

One of the areas we need to address is to get the market to understand there needs more parity in prices across services throughout the region.

This lack of parity in the marketplace has been a particular burden for Haringey, leading to, in more than one case, it having to pay much more than other London authorities – even immediate neighbours – for the same service.

We pay significantly more for some of our social care services – possibly up to 25% more than another London Council for the same services.

That’s partly down to the way local government tends to buy, he admits.

We were heavily reliant on brokers picking up the phone to suppliers to establish whether they had capacity to deliver the services. That, in turn, depends on staff knowing the market.

Their knowledge is probably very good locally, but outside of the local perimeter, they may not be as familiar with the market and what services are available.

All these problems get compounded by the fact that any marketplace made up of private providers in niche markets, such as care, is very hard for customers to influence. “I think there’s a fear factor that is played upon, especially when vulnerable people are involved; if the supply chain can leverage their position by playing on the fear, they will do. It’s all about supply and demand, especially in London, where some resources are scarce. This enables the market to increase prices knowing demand is high in these areas.”

The good news is that if councils can come together and break down barriers, exposing pricing norms and moving to share resources, they could start to deliver better value for money for residents, he’s convinced.

Compared to Haringey Council’s previous processes, the introduction of adam’s Category Development System (the vendor’s name for its DPS) has been a clear step-change when it comes to supply chain and pricing transparency, says Phelps. That’s because a live framework environment where suppliers can join at anytime is central to the system, which makes commissioning services simpler for brokers: instead of ringing around the whole supply chain until they find a supplier who can supply the services, they can publish the requirement to the whole market in one go.

You’re also enabling the providers to come back to the broker with a price according to the requirement and demand, within a cap determined by the council,” he says. Another advantage for suppliers out of a DPS is that they only have to join once – their accreditation admin only has to be performed once, making what can be a tough market to crack for an outsider a lot more enticing to try and get into.

Extending reach

Phelps and his team are very happy with progress so far, genuinely feeling that Haringey as a locale has benefited. The next step: extend the platform and its reach to get more authorities on-boarded.

How could that help? “If we can get more authorities to use the DPS, sharing the same information about providers, it will start to condition the market towards parity in prices and service provision. It will also avoid costly procurements being undertaken individually by authorities,” he believes. Around eight other London local government bodies are seriously interested, he says, and work’s about to start to see what can be done about enrolling them formally in the system.

Putting it all together, it does seem like that efficient online exchange idea really is finally taking off – and judging by Haringey’s success with its DPS, not a moment too soon.

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