Which Procurement Procedures are most Appropriate for ERP Projects?

In Part 3 of our six-part series on cloud-based ERP Projects, our specialist team of lawyers look at potential procurement procedures under the Public Contracts Regulations 2015, as amended, and which are most suitable for the procurement of ERP Systems.

Potential Procurement Procedures

Because of the specific nature of ERP Projects, there are certain nuances that set it apart from other complex ICT projects, such as the potential complexity in contract structure (more than one contract) or the complexities in ERP configurations, that mean certain procurement procedures may be more suitable than others.  Whilst the decision will also depend on other competing factors, such as timescales, budget, implementation model, and scope of the ERP system required, we have set out below the most commonly used routes to market by public sector clients, with a high-level appraisal of the benefits and risks of each, from a contractual, procurement and legal perspective.

Project specific issues should also be taken into account when considering the most suitable route for your project.  Our specialist team of procurement and ERP lawyers can give you targeted advice, so if you are about to embark on an ERP procurement project and would like to discuss your options further, please get in touch and we will be happy to help you.

PROCUREMENT ROUTEDESCRIPTIONSUITABLE?BENEFITSRISKS
Open Procedure

(Regulation 27)

One stage process, with no de-selection of bidders.

No conditions for using this procedure.

Minimum response time of 35 days, meaning the process can be run quickly.

You must set out all of your requirements at the outset, and there is no ability to negotiate on these throughout the procurement.

Unlikely to be suitable in most circumstancesTimescales – quickest of the standalone procurement procedures.

Suitable if you are expecting a limited number of bidders and you can set out all your requirements at the outset with no need to change/discuss these during procurement and in contract implementation phase (e.g. more suitable to waterfall implementation model).

Most suitable for simple procurements e.g. purchase of goods.

ERP often have complex integration/configuration issues that cannot be fully explored in an open procedure.  This sometimes leads to delays/disputes over what has been purchased once in contract, thus negating the short procurement timescales.

ERP suppliers often have contractual redlines owing to the standardised nature of the core product and the open procedure does not afford bidders adequate opportunity to negotiate these, thus ERP suppliers could be discouraged from submitting a bid and/or disproportionately risk price bids. Possible to market-test or invite comments from bidders, but what you can do with this is limited to a certain extent as you cannot negotiate or dialogue with them.

Risk that you end up with a preferred supplier at the end of the procedure who cannot sign your standard T&Cs, with no ability for you to negotiate with them – forcing you down a route of accepting a level of procurement risk or abandonment.

Restricted Procedure

(Regulation 28)

Two stage process.  Can limit number of bidders invited to tender, and thus more appropriate where there is likely to be a large amount of supplier interest.

No conditions for using this procedure.

No ability to negotiate solutions or terms  with bidders.

Potentially.Conducting a market testing exercise and requesting bidder ‘redlines’ early in process can help run an effective procedure where authority does not have resource/time to run one of the more complex standalone procurement procedures (e.g. CPN or Competitive Dialogue).

Able to restrict the number of tenderers so the tender evaluation is not too onerous on your evaluation team.

ERP often have complex integration/configuration issues that cannot be fully explored in a restricted procedure.  This sometimes leads to delays/disputes over what has been purchased once in contract.

Not suitable if you cannot prepare an invitation to tender that fully defines your requirements – bidders must be able to prepare a fully priced and binding offer in response to your invitation.

ERP suppliers often have contractual redlines owing to the standardised nature of the core product and the restricted procedure does not afford bidders adequate opportunity to negotiate these, thus ERP suppliers could be discouraged from submitting a bid and/or disproportionately risk price bids.  Possible to market-test or invite comments from bidders, but what you can do with this information is limited to a certain extent as you cannot negotiate or dialogue with them.

Risk that you end up with a preferred supplier at the end of the procedure who cannot sign your standard T&Cs, with no ability for you to negotiate with them – forcing you down a route of accepting a level of procurement risk or abandonment.

Competitive Procedure with Negotiation OR Competitive Dialogue

(Regulation 29 and 30 respectively)

Several stage process, deselecting bidders at different stages. More suitable for complex procurements/contracts.

Both procedures can only be used in certain situations (see Reg 26(4))

Ability to negotiate or dialogue with bidders.

CPN – requirements should be fully formed at outset.

CD – solution can be developed through dialogue.

Yes.Allows maximum bidder contact therefore maximising potential for good quality, suitable bids. Contracting authorities have the ability to discuss complex issues (implementation) and to really understand where the bidder’s key concerns lie.

Allows you to start building up a relationship with your supplier at the earliest opportunity.

Suitable for more complex procurements where the authority is unable to define its requirements from the outset, e.g. contracts where the authority is potentially seeking innovative solutions.

Ability to develop the technical specifications with more precision.

In a CD you can negotiate with the preferred bidder following submission of final tenders.

It is possible to reserve the right not to negotiate in a CPN.

At Preferred Bidder stage you should have a good idea of the different solutions, bidder redlines and therefore the risk of ending up with a preferred supplier who is unwilling to sign up to the terms and conditions is reduced.

Timescales – because it is a multi-stage process, the process takes longer than the open or restricted procedures.  However, you are in control of this and there are ways to mitigate the timescales running away from you e.g. by streamlining  negotiation/ dialogue to certain, pre-identified topics.

Resource heavy – by its nature, holding dialogue or negotiation sessions, and a multi-stage process, is more resource intensive for the contracting authority and likely to cost more.

Call Off from an existing Framework Agreement

(Regulation 33)

Number of existing frameworks could be used e.g. CCS Data and Application Solutions (RM3821)

Either direct award or mini-competition route, generally a quick procurement procedure

Potentially.

Subject to a technical review to confirm if the solutions available meet the authority’s needs.

Call Off Terms are already set when the framework is awarded so you are already starting from a well-developed contract position.

Timescales – generally a call off from a framework can be run fairly quickly as determined by the call-off process set out in the framework.

A framework for your requirements will already be included in the framework specification.

Call-off is subject to framework conditions and scope e.g. maximum call off contract term.

Likely that you will need to specify your requirement up front, akin to the open or restricted procedures, unless your call off procedure allows you to dialogue/negotiate with the bidders.

May not be able to address complex issues e.g. implementation during the tendering period unless your call off procedure allows you to.

If more than one contract is being procured (likely in an ERP scenario for SaaS and Implementation), then the structure of your call off will need to be considered e.g. lots or separate call offs.

Join us for Part 4 of our six-part series: Part 4 discusses the differences between waterfall and agile implementation approaches in ERP Projects.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this blog, please contact us today by telephone or email enquiries@sharpepritchard.co.uk.

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