Panel tenders: pros and cons
“Appointment of a panel of service providers” is the new norm in tender documents. Everything from engineering, to legal, to training — you name it, it's the procurement honey jar — for officials, its shaving months off every job they need done, and for suppliers, once you’re in — you’re in, and you can grow your team and business accordingly.
Panel tenders are not unique to South Africa — they’re used all over the world for the benefits they offer.
A panel tender is a tender where a set of service providers is appointed at a set rate, for a period of time (usually 3–5 years), up to a capped maximum budget, for a specific set of types of services. They are appointed onto the “panel” based on their eligibility much like any other tender — price (rates), quality, proven track record, legal compliance etc. And then they wait to be drawn on — they might never be drawn on, or they might be busy non-stop.
Benefits of panel tenders
The main benefits to the public sector of these procurement methods relate to efficiency gains, relationship and quality gains and programmatic gains.
Efficiency gains are in the procurement time savings — instead of following full supply chain and competitive bidding process for each new job, which can take months and in some cases years , a new statement of work is issued to a member of the panel, and the job initiated. Supply chain management are still involved to ensure certain aspects of compliance with the terms of the panel, but it's a far simpler process.
A lot of government work is long-term. Integrated Development Plans are 5 years, many other strategies have even longer timeframes or outlooks. Capital programmes, change management programmes — these can have long programmative focuses. Appointing panels allows government leaders of these programmes to set in place a programmatic strategy, and draw in additional technical or specialist support to augment their delivery as and when needed, and to do so with specialists with whom they build relationships over time. These suppliers become trusted partners in understanding the intricacies of the programmatic efforts, rather than piecemeal and disjointed new-entrants who constantly require onboarding onto the “bigger picture” and finer details learnt over time.
Cons of panel tenders
A key benefit of the traditional tendering process is its transparency — members of the public can see exactly what job is being advertised, and can see when it appointed, to whom and at what price. This enables members of the public to understand how their money is being spent, and also to follow the progress of specific projects — should they choose to, they could ask to be sent a report when complete, or do a social audit to see if a particular service was in fact delivered.
With panel tenders, the original panel is advertised, and awarded panelists are known, but the individual statements of work, and their value, are not known. This is a reduction in transparency. This is, however, easily fixed, by loading statements of work to the same tender portals/open data portals, reflecting them in departmental budgets, etc.
Of course, another potential cost could be reduced competition. The chance to compete comes around less frequently. I think we are still in the experimental stages of this procurement method to fully understand the impacts of this on different sectors. In some instances it might drive cross-firm collaboration, in others it will stifle innovation and result in monopolies and, over a longer-period of time, reduced price competitiveness. In many cases, it is resulting in a “labour broker” establishment — the death of small firms, while larger firms become brokerages selling on the services of independent contractors, for a profit. Interestingly, there have been a few recent adverts for panels of independent contractors — where departments feel they have the capacity to manage teams of independent technical support providers themselves.
Ensuring that there are local suppliers, involvement of small-scale (sub-)contractors, and BEE-compliant criteria in the procurement process becomes even more critical than ever, if the state is to use its procurement power to contribute to economic transformation.
Finally, there are risks like with any contract. You might not get the quality you want, and this could change over the course of a long-term panel (for many reasons). Of course, there is contractual recourse for this. Being able to measure quality, outcomes and impact would be a very valuable enhancement to ensuring value for money on services charged on rate card panel agreements.
Strategy-led, transparent and value for money
Panel appointments are used all around the world for their benefits in procurement efficiency and relational and programmatic gains.
As they get applied more and more in South Africa, we must ensure that they are applied in areas where they are linked to a clear programmatic strategy that requires ongoing support from a trusted set of delivery partners, we must ensure that we do not forget about being transparent to our tax payers, and we must ensure that there is ongoing attention to value for money (quality and price, equity and efficiency).