National Housing Maintenance Forum
Setting the standards for repairs and maintenance
Perils of framework agrements
As used by the public sector, framework agreements primarily deliver a singular benefit i.e. the reduction of procurement costs. For many years the United Kingdom used the framework agreement as a means to demonstrate compliance with the letter of European procurement directives if not the spirit. So if the EU was not exactly enamoured with the UK’s use of such agreements does that mean there is anything inherently wrong with them?
The answer depends how the client intends to use the framework. In 2008 the EU produced a Code of Best Practices Facilitating Access by SME’s to Public Procurement Contracts. This shows starkly how SME’s in the UK are only gaining direct access to about 31% of above threshold procurements whilst in Slovakia nearer 77% of above threshold procurements are awarded to SME’s. It is easy to fall into the framework trap of seeking a single operator who can deliver multiple services by convincing oneself that the local suppliers will get this work anyway further down the supply chain. There is no guarantee that will be the case and even if it does happen the local firms will have to reduce their rates to accommodate the main contractor’s costs. The dominance of the housing maintenance/repairs market by big players should be viewed with some caution and serious consideration to splitting into lots or value bands should be given.
There is a tendency for client’s to believe that once they have an agreement in place they must push all of their budget through it. This is not the case and often it is sensible to look outside the framework agreement when the market place has tightened up. Remember you should not be re-negotiating terms of a framework after it has been established to try and take advantage of reduced market prices. If you openly advertise outside the agreement there is nothing preventing your framework members bidding for the contract. Be aware in all public sector procurement accepting abnormally low bids can, and should, be challenged as Norwich City Council knows to its cost on its housing maintenance programme. Another bidder sought an injunction against the contract being awarded to Connaught PLC whose bid was reported to be some £6m lower than most other bidders. Although the full result of that will be heard later the cost of finding alternative service providers while the contract sits in limbo can be very large indeed.
Where a framework is genuinely required, i.e. an ongoing requirement for over OJEU threshold procurements, the mechanism for allocating projects is critical. The agreement itself should specify how future call-offs are to be allocated and client’s should record the process they have used on each occasion. This will basically be a check list against the criteria set out in the agreement. If a mini-auction process is necessary then remember to ask all of those on the framework capable of doing the work whether they wish to take part. Whilst you can seek supplementary information in the mini-auction you need to be mindful of and apply the same selection criteria as set out in the framework itself, although these may be more precisely set out or formulated.
Whilst framework agreements are very useful tools, they must be used in the right situation. They can seriously impact a local economy and may not deliver services of the same level of responsive quality and attendance as smaller providers are able to deliver. You must ask yourself if you really need a framework or will a term contract or other solution deliver better results. In any event a framework is certainly not something you can set up and forget when running mini-auctions you may undertake just as many procurement exercises as you aimed to avoid by setting up the framework in the first place.
Author of this article
Peter Gracia
Director for Gracia Consult
This article first appeared in the 2010 bulletin publication.
Read the original publication here
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