Fair and open competition

Competition boosts innovation, increases efficiency and improves access to government procurement for all suppliers.
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What you need to know
  1. Promoting fair and open competition leads to more innovation and better results.
  2. You should especially encourage new businesses, including SMEs, to compete for government work.
  3. You should make your processes simple and transparent.
  4. You should also break down silos within your agency and government to share ideas for procurement.
  5. You should avoid behaviours that limit competition, including being overly prescriptive and not questioning the status quo.

Importance of openness and transparency

The decisions you make as a government agency can either maintain the status quo or bring fresh ideas to the surface. Being transparent and fair will help you encourage innovation and promote competition. That will, in turn, lead to better procurement outcomes.

But having more open processes doesn’t necessarily mean you should let go of reliable relationships. You should try to strike a balance between the tried-and-true and the new and exciting.

Rapid changes in the economic landscape demand greater flexibility and agility. You should have strong systems and processes in place to ensure you can account for these changes and let them work for you. For example, by managing categories more efficiently, you can potentially reduce overlap and focus your resources where they’re needed most.

Encourage new suppliers

A key objective of the government is to expand its pool of suppliers with small and medium, regional and Aboriginal owned businesses. The best way you can support this is through transparency and simplification.

Being overly prescriptive in a way that forces newcomers to ‘jump through hoops’ can confuse suppliers and limit competition. Consider managing risks other ways, such as using processes that filter out the unqualified.

In an age of transparency, long-time partnerships that develop over time should be submitted to the same scrutiny as other contracts and relationships. Inertia is the enemy of innovation.

Foster competition through category management

We encourage you to foster competition by working collaboratively and transparently with your sourcing or category management teams.

By working with these business units you can flush out and share ideas and savings that have already been tested.

In this way, shared category management practices and knowledge become ‘baked into’ a government-wide approach.

Ultimately, category management should give you standardised practices that avoid:

  • the ‘upselling’ of optional extras
  • other devices suppliers use to differentiate their services.

When you adopt a standardised approach, you’ll also give clarity to suppliers within the category and allow for fairer competition based on true value.

Change behaviour through simpler processes

One aim of category management is to influence behaviours in the marketplace and your agency. It should help you facilitate innovation and fair play, reduce administration and achieve savings.

When you make your processes easier for suppliers, you’ll notice improved savings and greater collaboration across your functions. To get the most benefit, you should always:

  • understand the nature of the market category, including its size and current conditions. This includes, for example, how big it is, how responsive it is, and how it's affected by economic changes
  • work out what opportunities for innovation the category offers
  • decide whether the short- and long-term impacts of using category management match your desired outcomes.

As part of your strategy for each activity, you should evaluate both internal needs and market conditions. You should then use this analysis to choose and justify your preferred procurement approach.

Actions that promote or limit competition

An essential part of your procurement strategy should be promoting competition to help small and medium enterprises (SMEs) and regional businesses to participate.

It all starts with awareness, followed by action. Below are some guidelines on actions you should take and practices you should avoid.

Promote

Limit

Looking at your marketplaces with fresh eyes. Widen your lens to spot new ideas and new suppliers.

Not questioning the status quo in your existing supplier arrangements.

Examining procurement decisions to make sure they deliver the required outcome. Checking that quality matched price.

Rolling over contracts without a new strategic assessment of value for money and market impacts — or looking at potential new suppliers.

Taking into account prevailing market conditions. This can help you see whether you can make savings or whether prices are likely to increase.

Failing to consider long-term impacts of short-term activities.

Continuing and expanding your collaboration internally and externally. This can help you come up with new ways to encourage suppliers to seek government work.

Being overly prescriptive or restrictive when describing non-essential requirements. To do so may mean limiting the diversity of responses.

Using prequalification schemes where available and appropriate.

Over-estimating the cost to the agency of dealing with more suppliers.

Ensuring you manage risks and liabilities fairly.

Structuring contracts so that they constrain competition. For example, imposing excessive insurance requirements.

Restricting the number of suppliers only if the case for cost-saving is clearly made, and risks are appropriately managed

Preferring to deal with a few suppliers without demonstrating any real benefit in this approach.

Considering flexible ways to broaden the number and type of suppliers.

Requiring that suppliers have prior experience in providing goods and services to the NSW Government or agency.

Informing the market as early as possible about impending opportunities. This helps them coordinate their resources and have paperwork ready on time.

Surprising the market with large and complex requests, without allowing time for suppliers to prepare submissions.

Using simpler and standardised documents for low-value and low-risk activities.

Using whatever documents are to hand without reviewing and revising them.

Applying consistent contractual terms across contracts.