A dynamic purchasing system (DPS) is one of several public sector procurement methods. It’s similar to a framework in that suppliers must be pre-approved before they can join the system, but there are two features that distinguishes a dynamic purchasing system from a framework:
1) Suppliers can join the purchasing system throughout its lifespan.
Because new suppliers enter all the time, public bodies have a bigger, more diverse supplier pool than with other procurement methods. Competition is fierce, which drives innovation and provides contracting authorities with access to emerging technologies they might otherwise not encounter.
2) Once they’ve joined the purchasing system, suppliers compete in a mini-competition to demonstrate their suitability and value.
Unlike the DPS marketplace, frameworks don’t allow additional competition once suppliers have been admitted.
In this article, we’re going to look at dynamic purchasing systems in more detail and compare them to other public procurement methods, including centralised purchasing and direct awards.
What Are The Benefits Of A Dynamic Purchasing System?
Dynamic purchasing systems have many benefits for public sector bodies and suppliers.
Here are five of the primary benefits for both parties.
1) Enhanced Competition
As mentioned above, the system’s open nature, with suppliers continually climbing on board, encourages competition, raising the bar for products and services and delivering excellent value for money.
Suppliers need never miss an opportunity because the DPS is either open all the time, or reopened regularly. This is great if suppliers want to refine their tender or need a smidgeon more time to perfect their service, product, or work.
2) Increased Agility
New suppliers are consistently entering the dynamic purchasing system, giving contracting authorities plenty of options should their needs or the market’s needs change.
In fact, access to several pre-qualified suppliers is a great benefit for public bodies because the risk that they will not find a suitable seller is quite small.
3) Simplified Supplier Onboarding
Provided suppliers meet the approval criteria, it’s fairly quick and easy for them to enter the purchasing system and compete for contracts.
This benefit is particularly helpful for SMEs that are just getting started in procurement and want to get the experience – and confidence – they need to bid on single-stage (“regular”) contracts.
4) Reduced Administrative Burden
Dynamic purchasing systems specialise in the purchase of common goods and services, especially recurring orders. This enables public sector buyers to standardise many of their procurement documents and administrative processes, saving time and increasing efficiency.
Suppliers save time and effort because they don’t have to worry about lengthy documents to finalise DPS agreements.
5) Improved Transparency
Dynamic purchasing systems are structured in an inherently open manner, which ensures transparency in all operations. Not only is this in line with the government’s new procurement regulations, but it also plays an important role in developing trust between public sector buyers and suppliers (and other stakeholders) and fosters business relationships.
Are There Alternatives To Dynamic Purchasing Systems?
Yes, there are quite a few alternatives if a dynamic purchasing system doesn’t suit your procurement method. We’re going to look at three alternatives.
1) Centralised Purchasing
Centralised purchasing enables contracting authorities and buyers to assign all procurement activities to a single unit – a person, a team, or a department. A central control unit, in other words.
This means that departments, teams, and individual people must submit purchase requests, which are assessed, measured against the available budget, and approved or denied. It can be a long process, which causes bottlenecks and delays. The problem is compounded if the central unit (buyer) is responsible for decision-making for several departments simultaneously.
However, it also reduces risk because departments don’t spend money willy-nilly. Centralised purchasing ensures the integrity of budgets, reduces maverick spending, and lowers the risk of duplicate purchases. Accurate forecasting, financial planning, and budget spend are the result.
Another benefit is the discount that often comes with bulk buying. This is useful when the entire company needs groceries like coffee, tea, hand soap, toilet paper or stationery, like printer paper, pens, and highlighters. The common, recurring orders, basically.
In general, it’s recommended that small organisations go the centralised purchasing route, while decentralised purchasing is recommended for large public sector bodies and organisations.
A note on decentralised purchasing.
A dynamic purchasing system is a decentralised purchasing platform. Purchasing decisions are left to individual departments, teams, or people. However, decisions must be made in accordance with company purchasing policies and the standards set up in the system, so, they don’t have complete control over the procurement process.
2) Direct Procurement
The clue is in the name. Contracting authorities buy services, products, or works directly from an approved supplier. There is no middleman in a direct award, which makes the process faster than indirect procurement methods.
It’s a good option for specific (uncommon) purchases. It’s also recommended for instances when products or services are required ASAP and there aren’t any other services or solutions available.
The quick route is efficient, cost-effective, and time-saving and because of the direct link between buyers and suppliers, it reduces the risk of misunderstandings and delays in the procurement process.
There is also more quality control due to the proximity of buyers and suppliers, which facilitates relationship building over the long run.
3) Purchase Orders
Purchase orders (POs) are contracts between public sector buyers and suppliers that commit the parties to a specific procurement transaction. They’re invaluable in audits because they are incontrovertible proof that both parties accepted the commercial agreement. The agreed-upon terms include things like price, which can’t be increased (or reduced) if circumstances change.
Moreover, records prove what was purchased (or not purchased) and by whom on which date, eliminating confusion and defusing disagreements before they ignite.
A purchase order system manages all aspects of purchase order generation, including POs for new customers.
Even moderately advanced PO systems can generate the information you need to gain insight into your company’s financial performance, enabling you to adjust existing strategies if necessary and refine your planning for the next set period (six months).
It’s important to note, that some public sector bodies won’t authorise payment until they get a valid purchase order.
How To Choose The Procurement Method That Delivers The Most Value
The best way to choose the most suitable procurement method is to fully understand the contract (and the motivation driving the contract). Do you need products ASAP, are you looking to build long-term relationships, do you want to save costs, is a diverse supplier pool important?
The answers to these questions can guide your choice of framework agreement, but you also need to consider critical factors like budget and the size and complexity of the contract.
Even then, interpreting the data can also be a challenge. Delta eSourcing has the expertise and areas of specialisation required to guide customers towards the most effective procurement approach for their specific needs.
Contact us now to find out more about our range of eProcurement services.
