Benefits of a Single Supplier for Public Sector
Do the Benefits of a Single Supplier for Public Sector Managed Services Outweigh the Risks?
This question looks like it should evoke a simple answer, but in reality, the answer is not as simple as it seems. Moreover, the answer can change with time.
Initially, for the Public Sector the best outcome will always come from a reliable single supplier who delivers the expected results arising out of the tendering process. The key to reliability is "no surprises". The key to meeting expectations is for both the Public Sector organisation and the supplier to have a full, honest and open dialogue from the outset and to keep that dialogue going. However, the tendering process and commercial realities put pressure on both sides to be not entirely full, open or honest. Hence, the first few weeks after the managed services contract begins will be crucial, irrespective of the number of suppliers involved, and will set the scene for what is to come.
If the single source contract gets off to a good start the Public Sector can bask in the light of reduced procurement and ongoing management costs, and having achieved a contract on the most advantageous commercial terms that could be achieved. All will be happy. If there are no subsequent changes everyone wins.
However, if the initial expectations are not met then both organisations will go through a "settling down" period, which will result in winners and losers. Here are the seeds of future difficulties.
In a multi-supplier environment the Public Sector can use one supplier to benchmark the activities of the others. This is a useful approach for Public Sector officers but comes at the relatively high management costs of measurement, generating understanding and running the dialogue that will be needed to manipulate the contracts in the way the Public Sector needs to achieve the business case results and prove value-for-money. In a single supplier situation both sides can make compelling arguments that the precise circumstances faced are unique. Despite everyone coming to agreement on a point-by-point basis, the seeds can begin to grow.
Over time other changes bring additional pressure. The key issues underpinning the business case begin to alter. New processes and technologies emerge. Competitors, both inside and outside of the Public Sector environment, keep up a steady stream of messages that they could do better. Unless the Public Sector organisation and their sole supplier have great cultural similarities and harmonised adaptability to change, the seeds will begin to sprout. A re-tendering exercise might solve the problems. However, it might complicate matters enormously as the new tender will now have to cope with the possibility of the incumbent supplier being replaced and the consequent issues of the transition. All the gains made can be lost in a single stroke.
Of course, one of the main ways in which single supplier contracts stay successful is when the main players work well with each other from the outset and use their relationship strength to overcome the inevitable problems that arise. Unfortunately, neither supplier nor Public Sector can guarantee the continued availability of named individuals.
As a supplier of managed services I would like to be the single source as that would allow me to keep my initial costs down and to have more leverage later. I would be able to bid with a lower price. In a few cases this approach seems to have worked well for both the Public Sector and the managed services supplier, but not in every case.
As a Public Sector procurement officer I would want to insure against the risks of the relationship with a single supplier going wrong. If the contract was for a strategically important service, I would feel happier with multiple suppliers and would propose this as a risk reduction strategy.
Is either of these approaches better for the public purse than the other? We can never know on an individual contract basis. However, overall it seems to me that multi-supplier situations are less likely to end in tears!
I’m with the Procurement Officer.
