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Who benefits from Supplier Panels?

Who benefits from Supplier Panels?

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Plan A

Supplier Panels

This quote is from an attendee at an MBIE sponsored workshop exploring government procurement practices: “The suppliers on the panel use junior staff on panel work and most of them aren’t even registered. The problem is the client doesn’t understand…”

They were even more frustrated that they couldn’t access government work, despite offering what they assured us were superior services through recent innovations they’d developed. 

Frustrations with supplier panels go both ways, with one public agency manager telling us: “Suppliers on panels rest on their laurels, and don’t try as hard to impress you … you’re basically stuck with them for the full period whether they go the extra mile or not.”

In September 2020 the Office of the Auditor General (OAG) published a report called, Getting the most from Panels of Suppliers.

It says; “Setting up and managing panels of suppliers effectively requires both time and procurement expertise. Organisations need to consider their staff capacity and capability to both set up and manage a panel effectively. If staff do not have the right expertise, or do not have time to do things well, it is more likely that panels will not achieve the public value intended.” 

The report mentions an organisation complaining that having a panel meant it cannot always benefit from changes in the market, such as when a new supplier enters the market. 

“If an organisation has a panel of suppliers, it will not be able to use this new supplier, even if it is a better option,” they told the OAG. “To mitigate this, panel contracts should have a fixed term, and include provisions for panel membership to be refreshed after a set period of time.”

The report concluded that two main aspects where public organisations can improve their panel management are valuing their relationships with suppliers, and monitoring the performance of the panel, including supplier performance.

With respect to building strong relationships with suppliers, the report pointed out that this requires ongoing effort – with the need for more transparency being a strong theme. The Attorney General found that public organisations can build better relationships with suppliers through regular, two-way sharing of information and finding ways to work well together. Sharing information, such as who else is on the panel, upcoming work, who has been awarded work, and how secondary procurement is carried out was found to promote transparency and trust.

Interestingly, the Attorney General found that the public organisations reviewed could have done a better job of identifying the intended benefits of establishing a supplier panel – without which monitoring panel performance is less effective.

Having access to expert procurement advisors, proving a business case to use a supplier panel, and identifying intended benefits should be a relatively straight forward exercise, but apparently this is not always carried out.

Another question is – how do public organisations acquire the “capacity and capability” to monitor performance, particularly when they don’t have in-house expertise in that area of supply? And what is the potential cost of not having that expertise? 

A few years ago, a company won a preferred supplier contract it hadn’t originally bid for after pointing out to the procurer that the ‘price savings’ their panel was supposed to deliver could lead to perverse quality outcomes over time, as they had not accounted for how the ‘price/quality trade-off’ applied to the services concerned. 

The procurer in this case hadn’t considered how service provider business models in that sector (senior recruitment) operated, particularly where consultants could personally gain monetarily by sending their top calibre candidates to companies paying full fees, knowing that they could still place lesser calibre candidates with the procurer where, while their fees were lower, the work was ‘locked-in’. 

In the absence of strong processes to assess/compare candidate calibre, the procurer had no way of knowing if it was getting great or just average candidates sent its way.

This procurer was essentially creating an arbitrage opportunity and had not designed the RFx to manage for that risk and its implications for achieving its public value objective.

Since the pandemic we’ve seen increased delays in tender awards. We know of one company which has over 60 tenders awaiting award decisions. Given the time a tender remains current, that is a big number, and if we assume a cost of $3000 per submission that’s a considerable investment sitting ‘out there’ for one company alone.

While the cause of this varies and include staff shortages and absences, you can see the appeal of supplier panels as a means to streamline work allocation.

Supplier panels are clearly here to stay, and when considering them suppliers need to ‘do the math’. What are the implications of a supplier panel to your business – if on it/not on a supplier panel?

For suppliers, relationship development and brand recognition play important roles; particularly when clients at are at the early stages of developing an RFx. Even if you aren’t on a panel, the opportunity will come up again, so building your reputation as technical experts and your relationships with key decision makers is always important.

Winning Panel Tenders is a zero sum game. Play to win, winning tenders is a specialisation in its own right. It is not sales, nor is it marketing, so treat tender strategy and submission development as an investment.

Set the bar high. Use your RFx submission to raise the bar on performance monitoring. The great thing about being in a multi-supplier relationship is that you get to be seen outperforming your competitors. Influencing what those metrics are can provide the edge when it comes to performance evaluation.