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Creating a new market

Follow the questions for commissioners managing a market. Then click on a recommendation or use another checklist

Question These are questions that commissioners should ask as part of the market management process Recommendation These are recommendations for what a market manager should do to improve the performance of the market Link to another toolkit Link through to other checklists about good market management, or return to an earlier set of questions

Redesign contract in advance of next tender process

Need
Review of the design of the service and the business model in anticipation of future contract awards to address scale issues.

Problem
Options to increase the scale available in a market may be limited - for example, where it is not possible to combine existing elements of service provision - which can inhibit the creation of commercially attractive contracts.

Solution
After any contracting process, market managers should undertake a fundamental review of the existing contract offer in anticipation of the next phase of the service, drawing on feedback from suppliers about feasible business models for future contracts and an assessment of the diversity and quality of the bids received. Where significant numbers of contracts are due up for renewal in a similar time period, or where a different strategic goal such as service transformation is sought, it is imperative that steps are taken well in advance to work with the market to determine what synergies there may be across the market.

Utilise a prime/subcontractor model

Need
A different contract model that enables suppliers with sufficient financial and organisation scale and risk appetite to bid for contracts, while also allowing for flexibility in delivery through the sub-contracting partners.

Problem
Larger suppliers will often require a minimum level of contract size in order to justify the cost of bidding for and investing in a new or developing market.

Solution
A prime and sub-contractor is an option for commissioners looking to scale-up a market to attract sufficient investment and capacity for managing financial risk, while still promoting opportunities for small & medium-sized suppliers to enter and grow with a view to becoming prime contractors at some future stage. Prime providers can take on the prime demand and financial risks of a service provision - which may be considerable where a new service is being developed - and use their sub-contracting relationships with smaller and local suppliers to manage this risk and develop new service models with its supply chain.

Many local authorities have the objective of boosting procurement opportunities for local business. Stipulating a requirement for local firms to be represented in a prime contractors' supply chain will be one way in which to achieve this objective.

Develop larger contract

Need
A contract of sufficient scale that is commercially attractive to a wide range of supplier types and sizes, to ensure the fullest range of potential solutions.

Problem
Contract lots that are of an insufficiently large scale will be commercially unviable for many suppliers to bid on, taking into account the costs and risks associated with the bidding process.

Solution
Where scale is a priority to secure the commercial success of a market, commercial teams should seek to create fewer, larger contracts where there is greater scope for contracted suppliers to secure the economies of scale which will contribute to their potential to making a commercially attractive return, such as through service redesign; using locations more efffectively or identifying duplication of processes. Intelligence gathered from potential suppliers should provide insight on the level of scale which will trigger supplier bids.

When creating a new market, councils will need to consider the scale from which they plan to commission from. Where appropriate, increasing the scale of a contract can make it more commercially attractive to potential suppliers. Shared services are increasingly being used by local authorities across the country and provide a good opportunity for neighbouring councils to begin to share not only back office functions but also commission other services, jointly. Contracts of a larger scale give both the council and the supplier to opportunity to reap the benefits of economies of scale.

Encourage suppliers to form JVs and consortia to build scale

Need
Using suppliers with sufficient capacity to manage larger scale contracts, in line with strategic priorities on market diversity.

Problem
Creation of consortia to bid for contracts, or going beyond that to create a specific joint venture for a contract, will only happen if there are shared commercial expectations across all involved parties and the customer.

Solution
Early pre-market communications should stress a readiness to consider contract bids from joint-ventures and consortia, and develop a dialogue about how that model can support the strategic objectives of the market. Guidance should be available to firms to develop the appropriate relationships and create sustainable bids. Such active management of the supplier base is important to ensure that issues of scale do not unduly discriminate against certain types of provider.

Where appropriate, councils should ensure that contract scale complements consortia bids from smaller organisations and local businesses.

Specify required skills in the contract

Need
Contracted suppliers must ensure transferred staff have the skills and training appropriate to the delivery of the service.

Problem
Ineffective contract specifications can mean the supplier is not able to provide the levels of service expected.

Solution
If suppliers are asked to move across staff from other parts of their business to deliver a contract, it is important that they are required to have the right skills sets and, where appropriate, professional qualifications and experience. Pre-procurement communications with suppliers must establish the clear expectations on skills and service quality by which tenders will be assessed.

A key consideration is security clearance of supplier staff, due to the sensitive nature of the work in this market. As timings to conduct security checks can be onerous, having this as an up-front skill in procurement deals should stop delays to delivery once the contract is signed. In addition, an understanding of the specific needs of user groups within the criminal justice population will be key to addressing all user needs.

In the welfare-to-work market, due to the sensitive nature of working with some individuals, data security protocols and the qualifications of those working in the market will need to be agreed up front. In addition, an understanding of the specific needs of end users, from healthcare and social services to educational opportunities will be important.

Use supplier days to encourage contacts between different suppliers

Need
New conversations and relationships between different provider types in the market to promote new relationships in supply chains that support the objective of the market.

Problem
Suppliers will often have established supplier relationships which may not meet strategic objectives around local or SME involvement.

Solution
Market and supplier forums are an established route to pre-procurement engagement. For a market manager they are important in ensuring that from the start, a wide range of potential suppliers are aware of the potential new market and the commercial opportunities. Where complex policy challenges are being addressed, it is important that market days and other structured engagement develops beyond category suppliers and seeks to draw in ideas and interest from a wide range of supplier types and sizes. The outcome must be a readiness across suppliers to develop new commercial partnerships over time.

There are a number of existing forum for early discussion and networking. These include the ACPO conferences, the Justice Academy and forum such as the Offender Related Services Forum. However, commisioners should feel they can run their own supplier days to bring the market together to address problems facing Criminal Justice.

There are already a number of existing forum for early discussion and networking. These include Inclusion's Welfare to Work UK Convention and Exhibition annually, and trade associations like ersa provide a forum for suppliers to network as well. However, commisioners should feel they can run their own supplier days to bring the market together to address problems facing the Welfare to Work Market.

Specify required skills in the contract

Need
Contracted suppliers must ensure transferred staff have the skills and training appropriate to the delivery of the service.

Problem
Ineffective contract specifications can mean the supplier is not able to provide the levels of service expected.

Solution
If suppliers are asked to move across staff from other parts of their business to deliver a contract, it is important that they are required to have the right skills sets and, where appropriate, professional qualifications and experience. Pre-procurement communications with suppliers must establish the clear expectations on skills and service quality by which tenders will be assessed.

A key consideration is security clearance of supplier staff, due to the sensitive nature of the work in this market. As timings to conduct security checks can be onerous, having this as an up front skill in procurement deals should stop delays to delivery once the contract is signed. In addition, an understanding of the specific needs of user groups within the criminal justice population will be key to addressing all user needs.

In the welfare-to-wwork market, due to the sensitive nature of working with some individuals, data security protocols and the qualifications of those working in the market will need to be agreed up front. In addition, an understanding of the specific needs of end users, from healthcare and social services to educational opportunities will be important.

Develop a cross-public sector working group to engage with suppliers

Need
Shared understanding and management processes which ensure effective cross-public sector co-operation on key elements of a contract.

Problem
Where the performance and participation of other public sector bodies is directly linked to the delivery fo a contract, significant additional performance risk is introduced if service levels are not met, and the supplier is not in a position to address them.

Solution
Public sector commissioners must secure sufficient participation of external public sector partners in the design of the contract and the sourcing process. An appropriate working group structure at the pre-procurement stage will ensure alignment of public sector goals and understanding of the contingencies which any supplier must take into account in developing their bids. It is important that cross-departmental relationships are sustained beyond the contract award to minimise the risk of poor performance by a public sector partner.

When developing a new market, councils have the opportunity to build contracts that combine the outcomes of partnering public sector bodies. Key to this will be a robust governance and accountability structure, with all parties clear on the levels or risk and reward. Internal accountability and performance processes should not inhibit the effective operation of a contract with a supplier. A governance board that combines the commissioning leads of all organisations will ensure the market is given a clear signal of desired outcomes.

This working group could include members from:

  • MOJ
  • Home Office
  • DWP
  • MOD

This working group could include members from:

  • Local/Geographical Representation
  • DWP
  • HMRC
  • Social and Health Service

Use secondments or transfers of public sector staff

Need
Deployment of key public sector staff to a contracted supplier to ensure standards of service provision and a shared commitment to skills development.

Problem
Contracted suppliers need to be in a position to deliver services to the required professional standards and with the appropriate mix of skills available to them.

Solution
Transferring existing public sector staff across to support a supplier demonstrates a degree of commitment to service transformation by the public sector, and allows the contracted partner to access these skills within the management of the contract, providing a useful continuity of understanding and knowledge share with the customer. One consideration for market managers where staff are transferred is to put in place mitigation processes to ensure that appropriate levels of skills and corporate knowledge can be retained within the public sector, avoiding the risk of hollowing out existing centres of knowledge.

Ask the right questions in the invitation to tender (ITT)

Need
Ensure suppliers behaviour regarding use of small and medium-sized suppliers is sufficiently reflected in their bids.

Problem
Relying on contract clauses and frequent data evidence from contracted suppliers regarding the performance of their supply chains can be a costly and bureaucratic approach to ensuring suppliers reflect your strategic priorities on suppliers.

Solution
The key to ensuring suppliers reflect your SME strategy in their bids is asking the right questions at the right time. Expectations should be set out early on in pre-procurement engagement with potential providers should be set out clearly in the invitation to tender and the commercials section of evaluation criteria that are set out in it. This could be through setting out a model supply chain structure and asking assertive questions of bidders about how they would reflect that in bids. Suppliers are on the whole reasonably flexible in responding to stipulations regarding operation of any associated supply chain, where these do not unnecessarily impact on their capacity to manage a service effectively.

Many councils have the objective of boosting procurement opportunities for local businesses. Early pre-procurement market engagement can help ensure that the council's objective can be met by suppliers within the market. Stipulating a requirement for local firms to be represented in a prime contractors' supply chain will ensure that local firms have an additional opportunity to deliver services.

Use in-house provision but review skills capabilities

Need
Public sector staff competent to deliver a revised service.

Problem
The use of in-house teams may generate additional skills requirements.

Solution
Commissioners should generate a full review of existing capabilities at the start of a programme and ensure through regular reviews - and assessment against external market benchmarks - that appropriate skills for the delivery of the service are resourced and developed.

Work with public sector bodies to set KPIs

Need
Effective performance and accountability protocols to embed public sector partners in the successful delivery of a contract.

Problem
Ineffective cross-public sector relationships can create significant risks to the successful performance of a supplier contract.

Solution
All partners must shape the key performance indicators by which suppliers' participation in collaborative working will be measured. All contract stipulations must be engineered towards promoting effective teamwork between supplier and public sector partners. Internal accountability and peformance processes should not inhibit the effective operation of the contract. One of the roles of an effective market manager is ensuring that all public sector participants in a delivered contract are aligned and engaged.

Integrated services between local partners must have agreed outcomes and key performance indicators (KPIs) which measure the performance of a suplier in integrating services. Included in these should be the consideration of social value goals. Commissioners can help integrate cross-sector KPIs by ensuring that contracts and operating models are engineered toward promoting effective teamwork between suppliers and multiple local public sector partners.

There are no end-to-end measure in key performance indicators (KPIs) used currently. The inclusion of re-offending rates as a KPI would be one way to reduce these, in line with the strategic priorities in the market.

There is a need to include key performance indicators (KPIs) that cover the social value of programme outcomes. Including KPIs that measure sustained employment levels, or wage progression, will take longer to measure but will prove a better long-term indicator of success.

Stipulate stakeholder involvement in contract terms

Need
Contracting structures that establish the expectations of suppliers regarding the involvement of end-users, where needed.

Problem
Clear lines of accountability, if not clearly established, can create misunderstandings about the responsibility of customer and suppliers regarding the involvement of user and local stakeholders.

Solution
Where suppliers are asked to bid for public facing services, end-user involvement in the design of services and contracts can ensure that suppliers' bids and subsequent performance is measured against the things that matter to the users of the service. Clear contract terms must establish the nature of the involvement, the responsibility for managing the relationships and the degree to which engagement of end-users is referenced in performance management of the supplier.

Suppliers will need to be clear on what the council deems as the appropriate level of stakeholder engagement, as this could have certain implications on both cost and resource Council commissioners can attach sufficient incentive to the contract to increase levels of engagement. This engagement will need be able to be measured and quantified. Effective councils will know their key customers and develop performance indicators that are important to them, aligning these indicators with outcomes and reviewing them regularly.

Define users for this service and related KPIs

Need
Where contracted suppliers are required to work with an undefined group of service users, a contract must set out broad criteria by which the performance of suppliers' interactions with the end user will be measured and assessed.

Problem
Unclear contract provisions regarding involvement of users in service design and delivery (for example through co-creation) can create significant risks regarding supplier performance and responsibility.

Solution
Suppliers need to understand as much as possible - and as early as possible - about the likely profile of end users in order to be able to determine the most effective routes to interacting with them. For example, whether relationships need to be managed face to face or interactions can be handled largely through online or telephone engagement. Establishing these areas of responsibility is crucial to an effective performance management programme.

Engaging users in the design of services is important to ensuring the services delivers the desired outcomes. Council commissioners need to firstly understand, and then communicate to the market exactly who the users are, and what their needs are. If this information is unavailable then councils will need to commission external analytics and build up an understanding of local need together with other local public bodies. Once the market is clear on the needs of the user, there then needs to be sufficient incentive for suppliers to engage with the defined groups. Embedding an objective for community engagement in the ITT and contract can be an effective method for councils to communicate the objective

Ensure structured user group specified in contract

Need
Processes to ensure the needs of end-users are sufficiently reflected in the contract design.

Problem
Without effective relationships with service end-users and stakeholders, suppliers will struggle to develop contracted services that are in line with the public sector's wider policy outcome priorities.

Solution
Commissioning authorities should make clear to potential providers the nature of the groups - official end-user groups or stakeholder bodies - relationships with which are crucial to successful delivery of any new service, and set out the evidence which successful bidders will need to have to demonstrate they have or can successfully develop them. An element of structured feedback from defined end-users may, for instance, contribute to peformance management of contracted suppliers; reflecting this clearly in the tender will ensure that contractors need to provide the necessary evidence that they can form a successful working relationship with this group or end-users.

Identifying user groups for each outcome should be determined before contracting and clearly communicated to the market. Effective councils will know their key customers and develop performance indicators that are important to them, aligning these indicators with outcomes and reviewing them regularly. Within the contract, council commissioners will need to ensure that user groups are clearly defined, have an opportunity to engage and feedback on service delivery and suppliers have the right opportunities and incentives to engage with the relevant user groups.

The key end user groups to consider include:

  • Police/Commissioners
  • Court officials
  • Probation Officers
  • The Public/Community Forums
  • Reformed Offenders/Offender Groups

The key end user groups to consider include:

  • Social Services
  • JobCentre Employees
  • Heathcare providers
  • The Public
  • Local and Community forums