2.1 Government buys a wide range of goods and services, from routine, low value commodity items to highly complex assets and services. Procurement processes, techniques and issues differ greatly across this spectrum. At its simplest, the buyer knows precisely what it wants to buy and can clearly specify the required asset or service. Furthermore, there is a competitive market that can readily meet the requirement. At the other extreme, buying an asset such as an aircraft carrier can be considerably more complex and requires appropriate skills and expertise, suitable governance structures and advanced procurement tools and processes.
2.2 Sources of complexity in procurement include the following:
∙ project scale - for example several linked procurements being required to complete a larger project or a project with multiple parties involved;
∙ project duration - a long-term arrangement with a supplier or suppliers, as opposed to single, short-term delivery;
∙ internal interfaces - for example integration elements with existing business requirements or business process change;
∙ external interfaces - project exposure to market or demand risk, interconnection with existing assets, or other externalities such as timing and conditions of planning consent;
∙ solution and scope - where it is not possible fully to define the technical solution up front;
∙ technology - the use of unproven technology or proven technology in novel circumstances, including the development of bespoke solutions;
∙ financial structure - where it is difficult or undesirable to settle the financial structure of the project up front;
∙ market - where there is inadequate existing market capacity to meet the need and a competitive supply market needs to be developed; and
∙ delivery risks - where there are high risks in managing the solution within fixed budget and timescales.
2.3 This document deals chiefly with the complex end of the procurement spectrum, though many of the principles set out could apply equally well to more straightforward procurements. The next section explains the allocation of project risk and management, which underpin the different procurement approaches.