The PQQ is Dead; Long Live the PQQ!
The Government has made strenuous efforts to limit the use of PQQs but the decision is short-sighted, writes Ian Thompson.
The death sentence for the PQQ (Pre-Qualification Questionnaire) was pronounced a few years ago and slowly but surely the UK’s Cabinet Office has been on a mission ever since. First we had mandates prohibiting the use of the PQQ below £100k, then promotion of the Open Procedure as the ‘default’ tendering procedure for central government, and now finally the Cabinet Office has achieved its goal.... In Reg 111 of the new Public Contracts Regulations 2015 the use of a pre-qualification stage has been prohibited for any contract below £111,676 for central government (£172,514 for sub-central authorities). This applies regards whether the contract is for supplies, services or works.
But why all this fuss? Implicit in this regulation is an assumption that PQQs are ‘bad’. Industry complains about the way PQQs are used, and therefore we should stop them…
Personally I think this is short-sighted; it’s a classic knee-jerk reaction. It reduces down the sourcing options and this can never be good from the buyer’s perspective. And since we are talking about the spending of public money, then really some more thought needs to go into this.
The main drivers behind the limitation on PQQs have been (a) they are predominantly bureaucratic, (b) they add processing time to the procurement cycle, (c) they create a further barrier for the supply community, and (d) they add cost to a supplier’s bid costs.
Government has therefore reacted by (a) trying to streamline/standardise the PQQ, (b) trying to get rid of it all together on lower ‘value’ contracts, and (c) emphasising the need for speed through the procurement cycle.
The result …PQQ RIP!
Why is this short-sighted? The answer should be fairly obvious: public procurement managers are being denied a strategic option in their armoury when considering how best to source from a market. Instead of educating about the relative merits (i.e. risks and benefits) of a PQQ, Government has wrongly assumed all are bad and therefore all must go!
It is wrong to standardise the PQQ completely. It assumes that contract requirements and supply markets are uniform and from a process perspective the ‘work’ should therefore be standardised. A point for the process champions in this world, but also a fundamental misunderstanding of effective procurement. Few contract requirements are ever the same, and few supply markets are ever the same....so who thinks a standardised approach is going to work?
Value-add
The PQQ represents a considerable ‘value-adding’ process step in the public procurement process. Pre-qualification is a risk management opportunity to select suitable and capable providers prior to any commercial engagement. Therefore the decision to employ a PQQ (or not) and to standardise a PQQ (or not) should be a risk-based decision (…which is far more than a monetary value decision).
There are several key risks associated with selecting the ‘right’ supplier. Financial exposure, suitable experience, organisational capacity, technical capability, quality management, governance, sustainability and social responsibility are all key areas that need to be ‘assessed’ to name but a few. By removing the pre-qualification stage, the buyer is denied this and limited to the basic risk protection measure of trying to define the minimum standards (as per the Open Procedure). These are ‘pass/fail’ minimums. They can work satisfactorily if the buyer is sufficiently skilled at defining the minimum requirement accurately in advance – but this is rare and leaves too much risk and responsibility on the buyer’s prescience.
A better way of managing these financial and technical capability risks is to employ a ‘targeted’ PQQ that specifically assesses the key risks relating to the contract in question and the specific characteristics of the particular supply market.
In these situations the sourcing manager can then decide for themselves how the PQQ adds value and which specific risk measures need assessing.
Admittedly this requires a slightly more sophisticated approach, but it’s not rocket science and it is fairly easy to administrate. It is also far more ‘fit-for-purpose’ than the basic ‘no PQQ below £x’ approach recently introduced.
Selection
This is the other primary purpose of the PQQ (i.e. to select a ‘short-list’ of suitable tenderers). No PQQ = no selection = no shortlisting. This is fine if you have a small market, or if you can target just a limited number of suppliers. However, one of my new clients recently told me of a time when their e-tendering portal crashed having received 700+ tenders for one particular service contract! Nice to have such competitive interest in a public contract, but please don’t tell me that the decision not to use a PQQ here was the right thing to do!
Selection and shortlisting helps to reduce the number of suppliers going through the procurement process. We could refer to this as ‘process efficiency’. A PQQ would certainly have helped my client. In this situation avoidance of the Open Procedure would have been advisable.
The PQQ may have lost fashion in the corridors of Whitehall, but it still remains a key tool in the procurement manager’s toolkit. Please do not think all PQQs are ‘bad’. Risk management, selection and process efficiency all help deliver value-add to our procurement processes. Long live the PQQ!
Ian Thompson is a director of Cordie Ltd, a specialist training and capability development provider operating in the procurement and leadership arenas.
