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Introduction
PPN 03/21 emphasises the importance of ensuring public procurement expenditure contributes to economic, environmental, and social outcomes through better management of supply chains. Historically, construction projects have numerous supply chain members, with even small projects having multiple sub-contractors and suppliers.
The Education Authority’s portfolio of over 1,300 properties, spread throughout Northern Ireland, creates a wide range of construction projects in scale and location. An appropriate procurement strategy was essential to ensure a resilient supply chain delivered a wide range of construction projects to the benefit of all our children and young people.
Objectives
The key objective of the establishment of the EAs Dynamic Purchasing System (DSS) was to ensure resilient supply chains and ensure that the approach to market and supply chains would be modelled to:
- Determine risks to contract delivery.
- Formulate appropriate procurement strategies to mitigate identified risks.
- Shorten supply chains, where possible.
Actions
Determining Risk and Appropriate responses
An analysis of EA’s Minor Works portfolio revealed a requirement for a significant number of relatively small value projects, spread throughout Northern Ireland. Supply chain resilience was important to ensure delivery of EAs requirements and supplier mapping revealed a large number of SME’s may be interested in supplying these contracts and in a addition it identified that the location and value of some of the projects would not be attractive to large enterprises, therefore it was vital the procurement strategy sought to remove barriers to SME participation.
Market engagement was held to stimulate market interest and maximise participation. The strategy developed in response to the supply chain mapping and market engagement was eight separate Dynamic Shortlisting Systems (DSS), with cost bands. There would be no limit to the number of contractors appointed to the DSS and new entrants could apply at any time, to maximise market participation. A proportionate application process was developed to remove perceived barriers for SME’s. An expression of interest approach to secondary competitions ensured contractors only tendered for projects suitable to their locality and capacity.
Shorten Supply Chain
The supply chain mapping exercise revealed that only contracting with large enterprises would result in elongated supply chains. These large organisations would inevitably sub-contract the majority of works to SMEs in the local area. A strategy which contracted directly with SMEs in the local area would shorten supply chains and decrease delivery risk for the EA.
Including many different specialisms and cost bands in the DSS’s also shortened supply chains considerably. Smaller contractors did not encounter perceived barriers to participation as the cost bands appeared within their capability and capacity. Works that were previously sub-contracted are now awarded separately to the relevant SME e.g.- demolition works.
Outcome
The DSS’s have been a resounding success in delivering a resilient supply chain that maximises market participation and delivers the EA’s vast construction needs to a high standard, which benefits all our children and young people.
In the last financial year 2022/23, 96 projects were awarded with a combined value of £26M, with 98% of projects awarded to SME’s and 100% of projects awarded to Northern Ireland based contractors. 55 separate contractors were awarded contracts via the DSS, demonstrating the resilience of the supply chain.
Conclusion
This case study demonstrates compliance with Procurement Policy Note 03/21 Supply Chain resilience. The Dynamic Shortlisting Systems demonstrate the value of carrying out effective supply chain mapping to identify and mitigate risk. Procurement strategies which shorten supply chains inevitably lead to a better outcome for contracting authorities.