Katie Saunders and John Forde of Trowers & Hamlins explain how a dynamic purchasing system operates
A dynamic purchasing system (DPS) is a procurement procedure available under the UK procurement rules for commonly used purchases that are generally available on the market.
DPSs have been around for years, but were seldom used in the UK due to a series of strict rules about their set-up and use. The rules around DPSs were given a makeover in the 2014 directive, and incorporated into UK law via Regulation 34 of the Public Contracts Regulations (PCR) 2015 making DPSs more flexible and easy to use. In 2015, the Crown Commercial Service endorsed DPS for general use by UK contracting authorities.
A DPS works in a similar way to a framework agreement, by establishing a group of suppliers who have been pre-selected against stated criteria. The chosen suppliers, called ‘participants’, are then eligible to bid for specific projects awarded by a contracting authority as and when needed.
There is no obligation on contracting authorities to use a DPS or to guarantee a minimum spend. DPSs can also be set up by central purchasing bodies for general use by current and future clients.
DPSs have a couple of advantages that make them commercially attractive. Unlike framework agreements, they are completely electronic procurement systems and not time-limited. Crucially, they are open to new suppliers at any time. This ‘dynamic’ feature may be especially useful for users seeking to demonstrate best value, which may be harder to do with the ‘closed list’ of a framework agreement.
There may also be advantages for landlords looking to recharge costs by way of service charges. This is because under Section 20 of the Landlord and Tenant Act 1985, landlords must consider nominations by leaseholders of alternative providers to provide a bid for the services.
If those nominated service providers are not appointed to the original framework agreement this creates a procurement problem for landlords in respect of compliance with PCR 2015.
However under the DPS arrangement, the nominated service providers can join the DPS and be included in a mini-competition provided they meet the required criteria.
To join a DPS, suppliers complete a pre-qualification exercise, demonstrating their economic and financial standing and past experience. Suppliers who meet the contracting authority’s stated requirements will be invited to join the DPS, provided that they are not excluded under one of the mandatory or discretionary grounds set out in the PCR. Suppliers may apply as many times as they like, so it is possible for a supplier who was excluded earlier to apply again.
Throughout the life of the DPS, contracting authorities must allow new suppliers to apply to join the DPS, following an equivalent pre-qualification system as for the original participants. No limits are allowed to be set on the total number of participants in a DPS. This creates an advantage in terms of choice, but may make the DPS difficult to manage, especially if there are a high number of bidders in the marketplace.
DPSs are recommended for products, works or services that can be priced simply and where there are a limited number of available suppliers.
Procurements requiring a more complex assessment of price and quality, or where a high number of bidders are expected to bid, may be less suitable for DPSs and contracting authorities should continue to use framework agreements.
Katie Saunders, partner, and John Forde, senior associate, Trowers & Hamlins
This opinion piece was written independently, but first appeared in a chapter sponsored by Procurement Hub