4.7 It is generally accepted that compared to alternative procurement routes, Competitive Dialogue procurements are more costly to both the public and private sectors. 86% of general survey respondents believe that compared to the Negotiated Procedure, Competitive Dialogue has increased, or significantly increased bid costs, with 55% of contracting authorities of the same opinion.
4.8 The primary reason for increased public sector costs is the increase in administration, evaluation and support costs which increase when a large number of bidders are taken into dialogue and/or where bidders are not appropriately down-selected. With the majority of these costs rarely quantified but instead absorbed as public sector overheads, the true cost of procurement (regardless of process used) can often be overlooked.
4.9 Private sector practices mean they more fully understand the extent of their bid costs. Accountability within bid companies compels bid team leaders to quantify their expected spend and seek Board or Finance Director approval for such spend before entering into, and during, a procurement.
4.10 Public sector teams engaged in Competitive Dialogue procurements should engage in a shadow charging exercise to provide a more accurate picture of the cost of undertaking complex procurements. Such exercises will help focus the attention of the Senior Responsible Owner and Head of Procurement on costs and have a subsequent positive effect on timescales and behaviours. Data gathered should be shared between authorities to inform future resource planning.
4.11 Private sector representatives at the roundtables believed costs have risen from 2-3% of the contract size (under the Negotiated Procedure) to 5-6% (under Competitive Dialogue) for the losing bidder(s). Costs for winning bidders are broadly comparable under the two procedures.
4.12 With all Bidders involved in Dialogue expected to spend sums previously only encountered once 'Preferred Bidder' status had been secured, the bid community believes Competitive Dialogue is more subjective with an increased bid cost risk burden than alternative procedures.
4.13 To reduce costs, authorities must be clear about their objectives, avoid taking too many bidders into dialogue and down-select intelligently to prevent holding them in dialogue too long. Authorities may also wish to achieve cost savings by running a tight process with a specific number of timed dialogue meetings and identifying and engaging in dialogue only on the specific aspects of the project solution and contract.
Box 4.A: Reimbursing bid costs
| The 2008 Guidance recognised the increased cost of Competitive Dialogue but confirmed Government policy on not paying costs other than in exceptional circumstances. |
| Internationally, some contracting authorities have used incentives such paying a percentage of bid development costs to improve public sector behaviours during procurement and maintain the competitive tension of a procurement. |
| While policy on reimbursing bid costs will remain as it currently stands, HM Treasury recognises the value of considering the cost benefit of alternative approaches and will work with the ERG, and industry groups, to consider the issue further. |
4.14 One further area of spend which is of particular concern is the cost associated with the evaluation of design.
4.15 While design solutions are undoubtedly a major part of many Competitive Dialogue procurements, authorities often look for too much detail during dialogue, for example seeking 1:50 plans when 1:200 or 1:100 would suffice for costing. Contracting authorities should bear cost in mind when determining the level of detail genuinely required for evaluation purposes at each stage of dialogue and absolutely necessary to deliver the required planning permissions.
4.16 That is not to say, however, that the private sector is entirely blameless in this matter. A significant number of experienced bidders have admitted going 'above and beyond' the requested design requirements to impress stakeholders and attempt to influence the selection process.