Preliminary Market Engagement (PME) is an incredibly useful step in the procurement process, especially when one of the more restrictive procedures is to be selected. However, essential though it may be, PME has until now been largely ignored. New EU procurement directives, soon to be implemented in the UK, will change all this, and with a little luck this will ensure that more procurements are a success in future.
What is Preliminary Market Engagement?
Preliminary Market Engagement is the process of fact-finding before you enter into a procurement process. It’s speaking to suppliers in a low-key, unofficial way, asking them for advice, testing directions and options, discovering what costs might be incurred, and so forth. The information gathered at this stage can be very helpful, depending on the procurement procedure selected, in guiding clients to develop better ‘Invitations To Tender’ (ITT) documents that will ultimately lead to better decisions being made.
Why you may not have heard of PME
An undeniable fact about procurement that we all know and understand is that it’s an immensely rule-orientated process. For good reason, of course, as when multimillion or billion pound deals are being decided upon you want to be certain that you are making the right decision, and suppliers want to know that they have been given a fair crack of the whip. The ramifications for failing to follow these rules to the letter can be dire, and with disputes costing time, money and reputation, this is something to be avoided where at all possible. So, as PME is not mentioned in the current procurement rules it is not at all surprising that clients were reluctant to deviate from the well-trodden path to conduct such exercises.
The good news is that PME is now specifically mentioned in the new EU procurement rules. Our hope is that more clients will now seize the opportunity to engage in this pre-contract, pre-procurement step to help them make better supplier selection decisions from the outset.
Background to the new EU Procurement rules
We say ‘new’, but these rules were set out in April 2013 – they are simply yet to be implemented here in the UK. The EU provided member states with up to two years to do this, but as the UK was an avid lobbyist for these changes it is expected that they will come into force here later this year. As these changes are now imminent we thought you should know a little about this process step that’s being given new life.
When should PME be used?
One of the major changes in the EU Procurement Directives is the inclusion of two new procedures, ‘Competitive Procedure with Negotiation’ and ‘Innovative Partnership’, and the removal of ‘Negotiated procedure’, while ‘Open’, ‘Restricted’ and ‘Competitive Dialogue’ procedures remain as options. PME is most useful in the business case development stage or when you are considering using either the Restricted or Open procedure because absolutely no dialogue is allowed once either of these procurement processes have been entered into. In such restrictive circumstances, information gathered through PME becomes valuable indeed.
How PME can benefit your business
The benefits of using PME before entering into a Restricted or Open Procedure are potentially huge, and can make a positive difference to establishing a robust business case and clearer invitation to tender (ITT) documentation. If you are yet to fully shape your business case and are unsure about whether your project is even feasible, it is possible to enter into informal discussions at the outset of your project. The information you gather as part of these discussions can then be used to shape your business case and then, if you wish to go ahead with it, more formal negotiations can be entered into.
In order to glean as much useful information as possible from these preliminary discussions, it is often useful to put together a ‘Request for Information’ pack (RFI), which should include as much information as possible for potential bidders, including information about the current state of your business, its needs and where you wish to take things in the future. This process can also be used to create a fully comprehensive ITT and ensure that no crucial pieces of information have been left out of it. In order to do this, it is possible to ask potential bidders what they would like to see in the ITT in order to make the process clearer. This process will make things easier for both you and your potential suppliers, as you can then ensure that your documentation is crystal clear and will get you the outcomes that you are expecting. This will make any procurement process that follows far more cost-effective and efficient.
PME is also excellent for the market as a whole as these early discussions and negotiations, alongside the possibility of reduced tendering costs, can encourage more SMEs to get involved in the process. This, therefore, opens up the market to more competition, instead of businesses having to rely on the same few suppliers every time they put a project out to tender.
The risks of ignoring the need for PME
Without preliminary market engagement you run the increased risk of failing to secure the right supplier or service for your project, because your ITT may not be clear enough. If poor decisions are made due to lack of information at the outset you may end up having to pay for costly changes further down the line, which can send your timescale and your budget spiralling.
Although there are risks involved in failing to enter into preliminary market engagement, there are also some risks inherent in the process itself that it is important to be aware of. These mainly involve the requirement for all clients to act in a fair, honest and open manner within the procurement process. It is all too easy to show favouritism to those suppliers that have provided you with the most information and assistance, but it is essential that all advice garnered be shared with the other suppliers in the process, and all should be given a fair opportunity to tender for the project.
However, there is no doubt that the benefits of taking part in preliminary market engagement far outweigh the risks. Open your organisation up to the opportunity of significantly improving its supplier selection process through PME – better information leads to better decisions and means a greater chance of project success.