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Keystone column 58 – Economic indicators and procurement

By 17th February 2017 No Comments
Economic Indicators

Welcome to the Keystone Column. This week we look at three recent procurement cases that have established some important case-law suppliers should be aware of, the importance of economic indicators (especially the six month view of the economy) and how one firm is making the concept that ‘money follows the patient’ in healthcare a reality.  We conclude with our weekly list of current Irish public tenders.

Business Stories

Proportionality decision by European Court of Justice

An interesting development has arisen from a Dutch case in the European Court of Justice (ECJ). It relates to losing contracts to firms that have been found guilty of grave professional misconduct. In Ireland, this would include any company that has been found to fall short of the fit and proper / bona fides tests (at a minimum). This is known as the proportionality test. These companies must be rejected from the award procedures process. In a nod to the reason many of us find the law baffling, the Court has found that this cannot be stipulated in the tender documents and contracts BUT must be applied during the processing of bids. Why? To prevent somebody guilty of grave misconduct from bidding restricts competition – so they can apply but they cannot win even on a price only contract. Either way, Irish firms competing against rogue operators now have some binding ECJ jurisprudence to fall back on.

 

Why buyers must maintain good records

When we work with organisations that are tendering (that do not tender very often) they are often bemused at the rigour and level of governance and oversight we apply to the process. Two recent cases, one in Ireland and one in the UK highlight the reason we do this. We summarise some of the details documented by McCann Fitzgerald here.

The first case dealt with a losing bidder in the LUAS development project. They contested that the different approaches taken to scoring meant the overall decision was arrived at incorrectly. The judge however complimented Transport Infrastructure Ireland (the defender) and essentially found that bids can be scored using whatever approach an individual deems best for them to assess and mark what are often complex concepts and ideas. It was a victory for the conscientious buyer which should benefit most firms.

Meanwhile, in the UK, a huge contract to do with decommissioning nuclear waste found quite the contrary scenario. Insufficient details had been kept. The lack of keeping records in the UK was damaging to the authority and remedies will now be put in place to the benefit of the losing party.

Procuring authorities setting up their record-keeping procedures must keep detailed notes. They also need to ensure their internal procedures – from pre-planning right through to contract award – reflect the new regulatory obligations (known as an Article 84 report) as they are now part of Irish procurement law.

 

Interesting trends

Reading the market – economic indicators as predictors for market evolution and buyer behaviours

An interesting article on Procurious.com this week is a well-timed reminder on the importance of economic indicators when mapping out the public sector and private sector markets for a business.

Inflation: Economic indicators like the rate of inflation are the biggest issue on multi-annual contracts that feature internationally sourced components. The risk of a return to inflation which has been much debated means that suppliers should be factoring this into conversations they have with buyers as early as possible. We expect that some of the framework contracts currently out to market in Ireland will fail (the suppliers will pull out) because buyers will not be flexible enough to adjust contract terms in line with market prices (within a fair margin either side). There are some contracts at present allowing for a maximum rate of inflation of the Consumer Price Index (CPI – used to measure rising prices or inflation) category for the commodities they are supplying. If the sector has inflation of 2%, that is all they will get even if the overall CPI is running at 5%.

Employment: Lower levels of unemployment means talent is becoming scarce – another key economic indicator. As talent becomes scarce, labour unit prices rise as does the competition for talent. There is a limit to the extent that contingent (using contractors or outsource partners on a project to project basis) resourcing can help a company drive its business. In the services sector, in particular, it is important to inform buyers of market conditions and to keep them abreast of developments. It is also important to be able to demonstrate the capacity to deliver using more than one delivery model.

Optimism: Internationally, the six-month outlook is considered one of the key economic indicators for business. In Ireland, we have only ever been surveyed about our 12 month outlook by employer bodies or other groupings. Buyers work on a shorter time frame and response to market conditions as they happen. This is why a six month outlook can give an interesting take on buyer’s anticipated demand levels, the prices they are paying and also the conversations they have with suppliers about the conditions they are doing business in. Competition drives prices down, differentiation drives margins up, increases in demand drive prices up, and large increases in price may push buyers and suppliers to innovate together to come up with alternatives. These phenomena impact these kinds of indices.

 

Innovation

Activity based costing in the healthcare sector

On the theme of following important economic indicators, we have heard a lot in Ireland over the past five years about the principle of money following the patient in the health care system. An Australian company, PowerHealthSolutions, with an Irish base in Dublin’s technology hub, brings activity based costing principles to the healthcare sector (making this a reality). They offer full traceability on patient cases, inputs and costs so the sector knows where its money is going. Their software compliments financial reporting systems and its scalable and extensible, providing rich data for management to review cases and make decisions around management processes and case management. They are growing apace because they have proven their software in mature, high performing healthcare sectors like Australia and Canada.

 Note: we are in the sourcing & procurement business. We highlight things we like or that are novel or innovative. We seek neither compensation nor recognition for doing this. We are fully paid up members of the pay it forward mindset. Innovators should be encouraged.

New public procurement tenders this week 

Visit the Keystone website to view our take on the 500+ active public procurement opportunities with more than five days until their deadline. There are a vast range of services, supplies and construction related to public procurement opportunities in the following sectors (there are many more sectors than the sample list below):

  • Construction and related trades,
  • Professional & Advisory Services,
  • PR, Media, Advertising and related,
  • ICT supplies and services,
  • Training,
  • Property & facilities management,
  • Vehicle & automotive,
  • Catering and related services,
  • Cleaning and related services,
  • Waste Management,
  • Maintenance and related services,
  • Horticultural supplies & services,
  • Research & environmental monitoring,
  • Printing, office supplies and related services,
  • Trades,
  • Medical and scientific research, supplies and services,
  • A vast range of other services and supplies.

http://keystonepg.ie/keystone-e-tenders-report-open-ytd-as-at-1602-by-date/

http://keystonepg.ie/keystone-e-tenders-report-open-ytd-as-at-1602-by-sector/

Businesses interested in any of these strategic procurement opportunities that are unsure of how they can follow-up on these tenders can contact Keystone at any stage. We would be happy to discuss your needs and where they may fit with your business growth plans. These public procurement opportunities are sources of business growth and innovation for companies across the country.

Please note, e-tenders often has public procurement opportunities incorrectly categorised so people relying on e-tender alerts could easily miss out on opportunities if they are dependent on it. E-tenders is only as reliable as the people inputting tenders and mistakes are made very frequently. The Keystone Column includes all live tenders posted on e-tenders that have five or more days until their deadline as at February 16th 2017.