The challenges of procuring energy for the public sector


whitehallThe Energy Consortium MD Richard Murphy shares his views on the need for transparency in public sector energy contracts, and the intricacies involved in public procurement, in this sponsored post. Brokers assisting Contracting Authorities, or Contracting Authorities using brokers might want to read it.

Much is often made of the efforts of the Public Sector to work within the challenging Public Contracting Regulations (2006, superseded 2015 – PCR) and achieve a workable and competitive energy supply agreement. Public Buying Organisations (PBOs) like The Energy Consortium (Energy and Public Sector) Ltd – TEC – are often criticised for not having secured “the best deal” when in fact PCR is about transparency, anti-corruption and providing access to the widest possible supplier base when letting contracts or frameworks for major areas of Public Sector expenditure.

Whilst some might see the process of running an OJEU procurement as recognising the often complex rules to be at least recognised if not actually followed, it is anything but a box-ticking exercise.

As well as this, there will always be those who also claim that Public Sector procurement professionals are generalists in their area of expertise and not energy experts, leading to the view that the best contracts are seldom secured by Public Sector buyers. However these two views are unfounded.

In the first place the exercise is designed to ensure that these contracts covering significant expenditure are let in a fully transparent manner. This is in recognition of the fact that the Contracting Authority, where they are a Public Body or, as TEC are, legally constituted as such are open to either challenge if there is any evidence of the contract being let incorrectly. They are also bound to provide full information in the event that they receive a request for information under the Freedom of Information Act (FoI) on how the contract was awarded. Such issues do not apply when purchasing for the private sector. There is a good deal of what are termed “boiler plate” conditions which can have an impact on the commercial aspects of the framework and exclusion of these may render the contract award unsafe. Challenges and unsafe procurements are always a risk and the expertise provided by Public Procurement professionals in ensuring a safe award is invaluable, while the potential penalties of ignoring their advice can be considerable, with the contract at least set aside or a penalty paid to a party who could have secured the contract if they had submitted a bid.

On the second matter of a lack of energy expertise, I myself have worked directly in the Public Sector for eight years, having been in the energy sector for over 25 years and I am not alone in providing my expertise to support better energy procurement for Public Sector bodies and consortia. Such expertise is much more common than some would have you believe within the major PBOs and is also freely available to those who do not use their frameworks. Energy expertise is, though, nothing unless allied to that of those who have an appreciation for the PCR and all they entail.

There are also the issues of the specific requirements and demands of the Public Sector. Of course price is important, but with complex estates with many sites and meters, service is often as important, if not more so. A framework which gives leverage in terms of standards of customer service from the successful bidding supplier, with weightings on the scoring of an Invitation to Tender (ITT) response which reflect this, can be invaluable when dealing with the requirements of supplier delivery in areas such as billing and portfolio management.

The balance of a competitive price versus budget certainty, particularly in recent times when the Public purse has been squeezed, is often the key requirement which can be achieved through PBO frameworks. It may be obvious that such contracts do not achieve “best price”, as often lowest price comes with risk and unpredictability. Frameworks through PBOs such as TEC are often set up with the target of leveraging collaborative spend and this can generally achieve a benefit in terms of price (margin), but set against the requirement to measure the benefit and capture the spend and consumption in support of the collaborative agenda.

Finally there is evidence of players from the broker and consultant community being appointed as agents to assist a Contracting Authority in its aim of a workable energy contract. Again such arrangements may be beneficial, but the appointment of the agent might also need to be made through a transparent procurement process, often via OJEU and this may be an area where challenges and FoI (on the body purchasing through the contract, not the agent) may start to become more commonplace. Public Bodies should not be caught on the wrong side of the fence if such challenges emerge, as ignorance is no defence.

The Energy Consortium (TEC) provides energy solutions to public sector organisations.

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