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How to get the best procurement for schools
All schools are subject to public standards of accountability. Although schools spend most of their money on education staff, they collectively spend approximately £9.2billion on other areas including energy, catering and back office. The benefits of effective procurement practices includes: Financial savings that can then be re-invested in your priorities for driving up standards; goods or services purchased are fit for purpose; suppliers deliver (and continue to deliver) as agreed; legal and financial obligations are complied with.
If you’ve used a price comparison website to buy insurance, you’ll know that prices can vary dramatically. Shopping around can help you to save a lot of money. So, are you shopping around for your school as well? After all, with budgets being tight, what you buy, and how much you pay for it, matters more now than ever. Comparing or benchmarking prices will help you to make the most of every penny of your school’s budget.
Benchmarking can be used to identify significant differences in the way schools manage their resources. Through comparison with other schools’ spending and patterns of service, schools can determine whether there is scope for doing things better: improving efficiency, reducing costs or identifying the potential scope for savings.
Understanding your spend
Schools have autonomy over the use of their budgets and so it is for heads and governors to determine at school level how to secure better value for money. All schools should be working to make savings, spending their funds prudently and looking to make the most of their money in order to invest in teaching and learning.
The ‘Review of efficiency in the schools system’ identifies a number of characteristics which are common to many of the more efficient schools and proposes a number of actions that schools, government and our partners can take to support greater efficiency in schools.
Your school is responsible for its own financial management and the details of your deals and contracts. Understanding your finances and deals can help you identify where savings can be made and makes it easier to compare your current deals with those offered by public sector organisations such as the Crown Commercial Service.
The Schools Financial Benchmarking website enables all English maintained schools to prepare charts so that they can compare their income and expenditure profiles with those of similar schools.
The buying process is broken down in to three stages – planning, purchasing and managing. Different rules apply depending on the value of the purchase you are making. You could save money by using existing contracts or teaming up with other schools so that you have more purchasing power.
Why is procurement important?
You must follow basic procurement regulations because your school spends public money. This will ensure that the money is spent in a way that is fair, open and good value for money. Your procurement decisions must be fair and open. Poor procurement decisions and a failure to comply with procurement legislation could result in legal challenges from suppliers, contracts being cancelled and financial penalties which can be costly, time-consuming and impact on your school’s reputation.
As a general guide, the higher the value of the purchase and the more public money you’re spending, the more stringently you should follow procurement rules. Planning Budgets are tight, so make sure you plan before you make your purchase. Make sure that you know precisely what you need to buy (ask those who will be using it) and that it’ll meet your school’s needs over a period of time.
Think also about whether you could loan equipment, or share resources with other schools (which would mean not having to make a purchase at all). Maybe you could collaborate with other schools to increase your buying power? Check if there are any existing deals already in place for what you are buying through your local authority or a public sector framework. These will all be compliant and the hard work will be done for you. You will need to estimate the total contract value (the life of the contract including any disposal activity, excluding VAT) of what you are buying. Remember that you may need to do a business case for higher value purchases.
And don’t forget, value for money is not always about the lowest price. It’s about getting the right balance between quality and cost. Think about how you will measure these when you specify and evaluate your purchase.
What is a framework?
Frameworks are essentially contracts that other organisations, such as local authorities, central government departments or public buying organisations negotiate with suppliers to get the best, compliant deals. These organisations then make these deals available to schools and other public sector bodies. To buy from a framework, the main thing you will need to do at a school level is to carry
out a ‘mini-competition’ among the relevant suppliers on the framework. This is usually a much quicker and simpler process than setting up a new contract yourself.
Check with the following organisations to see if there is an existing contract/framework agreement for the goods or service you want to buy: Crown Commercial Service (CCS), The Crescent Purchasing Consortium (CPC), Pro5, your local authority (you may need to register with some of these organisations, but this is a simple process – don’t let it put you off).
Frameworks have already gone through a competitive tendering process, comply with public sector procurement regulations – on certain frameworks you won’t need to look for competing bids, favourable terms and conditions have already been negotiated, and if anything does go wrong during the life of the contract, you’ll have the support and assistance from the organisation that negotiated it.
Buy Buy Buy
So, you’ve planned your purchase meticulously, and now’s the time to buy. How you do this depends on how much the contract is worth and your local authority’s procurement thresholds. Typical values are as follows: Less than £10K is a low value purchase; £10k to £40K is a medium value purchase; £40K + (but below the EU threshold) is a high value purchase.
Don’t have a buying decision tree in school? Use the purchases checklists providing School Business Managers with information relating to the basic questions and choices you need to consider when you need to purchase any goods, works or services for your school. Note that aggregation rules do apply.
If the totality of the contract for the services is below the threshold as calculated following public contract regulation rules then just public sector procurement policy, EU Treaty principles and UK competition law would apply. Open competition should be considered to comply with transparency requirements and ensure value for money has been tested. Purchases with a value above the EU threshold must follow EU procurement process.
EU public sector procurement
The European Union (EU) has introduced rules to open up public purchasing by making states remove restrictive practices. These rules are incorporated in a ‘Directive’ which, converted into legal obligations in the UK through Regulations, place particular duties and responsibilities on all public spending contracting authorities which the UK courts can enforce.
The Public Contracts Regulations sets cash limits (excluding VAT) for the goods and services they cover. These limits are referred to as thresholds. The thresholds are revised every two years. The last review was on 1 January 2014. For all schools this is: £172,514 (€207,000) for all goods and most
services and £4,322,012 (€5,186,000) for the procurement of works.
Services used solely for the purpose of delivering education and some other specific services including but not limited to health, social and culture are subject to the higher Light Touch Regime threshold of £625,000 (€750,000). When the value of a contract, over its expected duration, exceeds or is likely to exceed the relevant threshold, you must tender these contracts in OJEU. The Public Contracts Regulations 2015 apply to procurements from 26 February 2015. The Regulations offer a number of ways in which to estimate the value of a contract. It is expressly prohibited to split requirements into smaller units or orders to avoid the rules and regulations.
Key principles for education
The key principles for education include a requirement to advertise non-specific education commodity or services contracts in the Official Journal of the European Union (OJEU) which exceed £172,514; setting time limits for the tender procedure; the use of the universally acceptable standards in specifications to promote wider competition; making early decisions on the criteria for the award of the contract; not discriminating against foreign suppliers; offering debriefing to unsuccessful tenderers; and the need to keep statistics of procurements made under the terms of the directive. In certain circumstances, a contract let by a public body including schools will not be deemed to be a contract for the purposes of the public procurement regulations. The relevant circumstances are that
the participating public bodies co-operate to perform public services they must provide, meeting common objectives and that the public body exercises the same kind of control over the service provider as it does over its own schools. There is no private sector ownership of the service provider or any intention that there should be any.
Light touch regime
Services listed in Schedule 3 of the Public Contracts Regulation 2015 are subject to the light touch regime. These include those services used specifically in education provision including the provision of school meals. Services that could also be used elsewhere than in a school i.e. building maintenance and ICT, do not come under the light touch regime and attract the lower threshold.
The threshold for advertising under the light touch regime is £625,000 (€750,000). Treaty principles of transparency and fairness still apply to lower value contracts. Under the light tough regime all schools shall award contracts by publishing in the OJEU a call for competition. This can be either a contract notice or prior information notice (PIN) which can be published a year in advance and cover multiple contracts provided that it appears continuously, contains the information required on the form, refers specifically to the types of services that will be the subject of the contracts to be awarded, indicates that the contracts will be awarded without further publication and invites interested suppliers to express their interest in writing.
Prior Information Notice (PIN)
Other than for publishing a requirement under the Light Touch Regime, you may publish a prior information notice (PIN) to make known your intentions of planned procurements. You can submit your PIN online at the European Commission website. Advantages of publishing a PIN are that you can alert the market early of your requirements and in some circumstances take advantage of reduced timescales.