COMMENT
BACKUP PLAN
We’re going through some uncertain times, what with
Brexit and the collapse of leading players in the FM sector.
Here, Julian Fris, Director at Neller Davies explores the role
of emergency procurement in helping to weather the storm
There seems to be one certainty in business
today; we will have uncertainty.
Whether its political, social or environmental,
sudden shi s seem to be more commonplace and
the consequential impact on services providers
cannot be underestimated.
Exceptional circumstances, may mean the
government and related public bodies have
the capability to suspend the normal rules and
regulations governing procurement and buy goods
or hire companies to perform their services without
following a full procurement process - be that a
tender, competitive dialogue or other. A recent
example in the UK could be the no-deal Brexit ferry
contracts, or the a ermath from the demise of
Carillion. But what constitutes an emergency and
what changes in relation to procurement under such
circumstances?
Normal procurement rules follow a set structure.
We scope a requirement, prepare a contract notice
and post on OJEU, Contracts Finder or other
platforms and provide a descriptive document for
potential bidders to determine whether they want to
submit or not.
Applicants then submit a prequalification supplier
questionnaire (SQ) which sets out financial, technical
and compliance criteria which is then rated.
Depending on the process a number of bidders
(typically 5) are then shortlisted to bid, participate in
dialogue, negotiate and so on. What is set out in the
Notice determines the procurement red lines i.e. you
can only follow the set process and cannot deviate.
Where authorities don’t, they could be challenged
at the end of the process during a 10-day standstill
period. It is cumbersome but ultimately fair, and we
adopt some of the good practice for private sector
bids.
An emergency situation, however, is where there
is a sudden unforeseen event resulting from a ‘force
majeure’ that results in injury, loss of life or critical
damage to property or infrastructure. These are
typically emergency situations which can include
natural or manmade disasters such as earthquakes,
cyclones, tsunamis, volcanic eruptions, flooding, fires
or contamination; failures of critical infrastructure
or equipment, where there is a failure of a prison
security system or critical hospital infrastructure;
critical health or environmental emergencies such
14 APRIL 2019
as a pandemic or food safety incident; or political
emergencies such as a war, coup, or civil insurrection
in the UK or countries where the UK o† ers support.
It could also be security emergencies such as a
terrorist attack, serious crime or major cyber-attack
or unforeseen events that make it impossible for
government bodies to perform their critical functions
in the necessary timeframe.
WHY WOULD IT HAPPEN?
If there is an e† ective procurement process in place
these emergencies could be avoided. The di† iculty
is where a company has had a sustained period
of poor performance but is still gaining business
through a variety of legitimate means. The e† ect of
‘trading their way out’ of a crisis is only as good as
the rigorous controls on costs that are applied on the
business. If they are weak more business translates
into greater exposure which impacts liquidity and
ultimately results in business failure.
Similarly, a lack of good business continuity
planning could expose an organisation to greater risk
and they could abuse procurement rules. However,
this is by degrees, a natural disaster which requires
significant volumes of grain and will need a direct
procurement.
HOW TO AVOID AN EMERGENCY PROCUREMENT
A vast number of procurement projects are routine
and predictable. They are time limited and if run well
operators can retain contracts for long periods but
equally where there is change this should be smooth.
Within that process, there should be e† ective
business continuity and disaster recovery provisions
which means that sudden changes can be managed
within an existing arrangement.
However, a major catastrophic incident may mean
normal service is suspended for a period of time
and that the economically most capable companies
may be brought in at short notice. This will be less
about cost and more around capability to continue
operating for the public good. Any decision should
transcend the rules but with safeguards in place to
ensure its not abused.
In a genuine emergency, the key consideration is
finding a shortened process which gives assurances.
Procurement teams need to be comfortable that they
are buying safely for a company. ‘Safely’ could cover
a multitude of checks, including financial stability
of the business being contracted – something that is
proving more of an issue in today’s FM marketplace.
There are a number of channels businesses can
explore.
Framework agreements are e† ective because
buyers have access to suitably pre-qualified
companies. However, in some cases these are not
appropriate and can be restrictive. You can draw
down supplies or run a mini-competition. Our
experience is mixed. However, dynamic purchasing
may be more e† ective where bidders are invited onto
a framework at any time and regularly update their
details to meet a client’s requirement e.g. Achilles or
Constructionline.
Direct awards can be made and these have to be
signed o† by an organisation’s Board and they have
to justify their actions. On occasions this may go to
the relevant Secretary of State for sign o† .
In the situation of a complex FM contract,
organisations can use step-in. If your appointed
contractor cannot fulfil the need through
performance or capability then the organisation
can bring in a third party to take over that element
of the service. Where it is performance related, this
will be time limited and at the cost of the appointed
provider and ends when they can demonstrate
suitable competencies to do the job.
There are a number of other companies can
explore, for example, entering into more strategic &
collaborative partnerships with their providers. This
could result in a more outcome-based approach
which relies on a pre-established relationship and
more e† ective e-risk sharing.
KEY CONSIDERATIONS
The key considerations companies need to make
before adopting emergency procedures are:
Clarify that the situation meets the criteria for
treatment as an ‘emergency’ and that this direct
approach to procurement can be fully justified and
isn’t deliberately uncompetitive
Identify, specify and prioritise the immediate
procurement activities that will bring relief
Consider the operating environment and conditions
‘on the ground’
Find out what other government agencies and NGOs
are doing and, where possible, collaborate and for
example look at available frameworks
Consider your duty of care to suppliers and take
appropriate measures to ensure their safety
How to ensure a level of accountability during the
emergency and how to establish a management
structure to coordinate and authorise necessary
procurement once the situation has been stabilised
ADVICE & OPINION