Forward Commitment Procurement Know How Programme Part 1 Introduction to Innovation and Forward Commitment Procurement KHP 1C: The FCP Process: Overview These materials remain the property of BIS. They constitute part of a ‘learning by doing’ programme and are unsuitable for stand alone use. They must not be used or passed to other individuals or organisations without the express and written permission of BIS

2 Forward Commitment Procurement Know How Programme Part 1 Part 1: Introduction to Innovation and Forward Commitment Procurement By the end of this section you will be able to explain the rationale of FCP and outline the FCP process. Overview KHP 1A : Innovation and FCP: Introduction, concepts and background. KHP 1B : FCP principles into practice. KHP 1C : FCP process: overview. Activities and resources Work through the key points Read the case study Complete the review exercises and submit the worksheet Review and coaching session

3 FCP Know How Programme KHP 1C Contents KHP1C: An overview of the FCP Process This module will cover the FCP process stage by stage. By the end of this module you will be able to describe and explain the various steps involved in the FCP process.

4 FCP Process Overview Forward - Commitment - Procurement: all the words are significant: Success of your FCP project will involve: –changes in the way procurement is planned and implemented –strengthening links between policy / operations and procurement –being a demanding and credible customer –actively creating the market conditions needed to deliver a solution –tenacious project management FORWARD Anticipate future needs and let the market know what, when and how much COMMITMENT Demonstrate a genuine intention to purchase a solution PROCUREMENT Procure a way that supports the supply chain deliver and buy the solution when it becomes available

5 FCP Process Overview It is useful to approach the FCP Process as three distinct stages leading to the delivery of the required outcomes Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Market sounding Market sounding review Procurement strategy and specification Implement procurement strategy Purchase goods or services IdentificationMarket EngagementProcurement FCP Process Stage 1 Market consultation FCP Process Stage 2 FCP Process Stage 3 Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Could FCP help deliver a solution? Recognise problems and unmet needs Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement FCP Process Stage 1 Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Outcome s

6 FCP Process Overview The Identification Phase The FCP process begins with systematically identifying your ‘unmet needs.’ What do we mean by an ‘unmet need’? –An unmet need is a requirement that you have now, or (preferably) one that you will have in the future, that current products, services or arrangements cannot meet, or can only do so at excessive cost or with excessive risk. How do you uncover unmet needs? The starting point for identifying unmet needs is often the recognition of a problem that needs resolving, or a policy objective or target that needs delivering that requires the introduction of new approaches, products, services or arrangements. To establish your unmet needs you will need a way to recognise and define problems, or to bring the objective into focus, so that you (and the organisation) can decide to do something about it. In Part 2 we will look in more detail at how to you might plan and implement an ‘unmet need process’ in your organisation.

7 FCP Process Overview The Identification Phase Anticipation of future ‘unmet needs’ Innovation takes time. (Procurement takes time and an organisations internal processes can take time). The FCP process will normally take at least 2 years to deliver a solution. The more time you allow for the supply chain to deliver a solution, the better outcome you will get. So as well as bringing current or emerging issues, problems or objectives into focus the unmet needs identification stage of the FCP process involves thinking ahead and anticipating future ‘unmet needs’.

8 Identifying an unmet need An Example A London Borough Council identified a problem: the increasing and unpredictable cost of waste disposal and landfill costs; the diminishing availability of landfill sites; future requirements for non export of waste outside the London boundary; current waste management solutions could not solve the problem; business as usual would not deliver what was needed. This was identified as an ‘unmet need’ that needed to be addressed. Failure to address the problem was not an option. By identifying this unmet need early, the Council allowed time to stimulate the supply chain and identify innovative waste solutions that could be in place before costs escalated and the unmet need became a crisis.

9 Identification Phase Recognising unmet needs How do you recognise unmet needs? Think about: Problems that need solving; Strategic pains; Targets missed / unable to deliver; Costs escalating / or unpredictable; Policies you cannot deliver or risk not delivering; Opportunities that are not being taken; Compromised ambitions; Other? Are you aware of any unmet needs in your organisation? –Brainstorm some ideas under each of the headings above.

10 Identification Phase Recognising future needs How do you anticipate future needs? Think about: Large projects that will be coming on stream. Development plans. Procurement / contract timeframes – when are large or strategically important contract up for re-tender? Changes taking place e.g. in the climate, economics, society, regulations. New policies and priorities that will emerge. New regulations coming into force in the future.

11 FCP Process Overview: Identification Phase Thinking in terms of outcomes, not products Once you have identified unmet needs that need resolving the next step is to ‘unpack’ and articulate the requirement in terms of the outcome(s) you need to deliver –i.e. a description of the requirement (unmet need) in output or outcome terms, concentrating on what is required rather than how it is to be delivered. Once a problem has been identified it is natural to try to imagine the solution. The problem with this is that you are limited by what is currently known or available to you. By specifying outcomes rather than a solution you allow room for innovation to create new and better options. Unpacking and articulating the unmet need in outcome terms. Definition: Outcome (or Output) based specification “An Output (or Outcome) Based Specification (OBS) focuses on the desired outputs of a service in business terms, rather than a detailed technical specification of how the service is to be provided; this allows providers scope to propose innovative solutions that might not have occurred to the procurement team”.

12 Examples of unmet needs in outcome terms A London Borough has identified a requirement for: –a cost effective, on site waste management solution for non recyclable waste, suitable for use in high rise flats and council housing in a densely populated urban environment, that eliminates the requirement for waste collection, involves minimal management and is environmentally benign. A Hospital has identified a requirement for ‘Future Wards Lighting’ delivering: –a step change in patient experience i.e. creating a pleasant healing environment with patients being in control of bed zone lighting levels and ambience and provide the lighting necessary to perform clinical and nursing tasks, and incorporating measures to reduce the risk of hospital acquired infections; –a demonstrable step change in energy efficiency with progressive improvements in energy efficiency and operational performance over the life of the project; –financial arrangements to spread the cost of capital investment. Another hospital has identified a need for an Ultra Low Carbon Energy Solution.

13 Identification Phase Could FCP help deliver a solution? Identifying an FCP project Not all unmet needs can be delivered by FCP. So the next step in the FCP process is to determine which unmet needs could be addressed most successfully using the FCP approach. This will involve establishing if there is: –a genuine unmet need that needs a solution? –a procurement opportunity and budget? –sufficient time to allow for market stimulation and supply chain innovation? –a high level of leadership and staff commitment? Uncovering this information will involve close liaison with and engagement of colleagues. It will also involve developing links between the procurement and policy / operations departments of the Organisation. Necessity and a procurement opportunity is a winning combination for an FCP project.

14 Market Engagement Phase Let the market know about your unmet need Make the unmet need and requirement visible and credible to the market. Having identified an FCP project the next step is to communicate the outcome based requirement to the supply chain, and invite the supply chain to respond. Then further supply chain engagement and consultation can be used to create the market conditions necessary to deliver these requirements solution. Market engagement involves: –A formal Market Sounding process. –Market Consultation activities.

15 Market Engagement Phase Market Sounding FCP Market Sounding Process Put together a Market Sounding Prospectus setting out the: –unmet need (the problem or issue you are addressing); –requirement (in outcome terms); –context (current situation, why innovation, drivers); –procurement opportunity (scale and timeframe); –wider market (who else has this unmet need). Design a Response Form: –a framework for the supply chain to respond; –facilitates collation of information. Write a Communication Plan setting out: –how will you get the information out to the supply chain; –which ‘intermediary organisations’ can help you. Definition: “Market sounding is the process of assessing the reaction of the market to a proposed requirement. Market sounding should begin at the earliest possible stage in the procurement process”.

16 Market Engagement Phase Market Consultation FCP Market Consultation Process This stage will help you to understand the: –state of the market; –appetite of the supply chain to deliver a solution; –technical options available and –potential barriers to delivery of the outcomes. It will help you to: –refine your outcome based specification and –begin to formulate the procurement strategy best suited to delivering the outcomes you need. Definition: Market Consultation “Assessing the reaction of the market to a proposed requirement and procurement approach, in order to bring supplier perspectives to public sector procurements at an early stage”

17 Market Engagement Phase Market Consultation FCP Market Consultation Process How? For example via: –Market Consultation Workshops; –facilitated meetings or events; –bilateral meetings with suppliers. All market engagement is ruled by the need for openness, transparency and maintaining a level playing field. All market engagement needs to be entered into in a considered and logical way, taking into account the idiosyncrasies and nature of the supply chain.

18 Procurement Phase Creating the market conditions and managing risks Procurement Strategy and Specification The final phase involves actually buying a solution. The strategy and specification will draw on the information gained during market engagement phase and will set out, for example: –state of the market based on market engagement; –refined OBS; –barriers and risks and how they will be addressed; –how the organisation will go about procuring a solution; –procurement process; –timeframes; –how trials and demonstrations will be handled; –level and type of forward commitment envisaged; –routes to wider market; –roles and responsibilities. Competitive Dialogue is the procurement process usually recommended for FCP projects.

19 Procurement Phase Procurement Strategy Check that the procurement strategy has covered all angles: Are all the stakeholders identified and on board? Budget in place? Are roles and responsibilities clearly defined? Have you updated the supply chain on your plans? Are the risks being managed? Are there any skill development or training gaps that need to be filled? (for example in competitive dialogue) Do your need technical support or advice? Are you likely to need funding for demonstrations, or to support first phase deployment? Implementing the Procurement Strategy Once the strategy is in place and agreed the process of implementation should be relatively straightforward.

20 Procurement Phase Forward Commitment? Forward Commitment Based on the market engagement phase you should now have a clear view on the level, type and duration of any forward commitment needed to deliver the outcomes you are looking for. At the end of this process a formal, or contractual forward commitment may or may not be needed. In other cases you can use more formal but legally non binding indications of your commitment. In many cases the process itself has served as sufficient ‘forward commitment’ and the market engagement phase will in many cases have provided sufficient to the market by providing the necessary ‘credible articulated demand’.

21 FCP Process Overview Summary of the FCP process Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Market sounding Market sounding review Procurement strategy and specification Implement procurement strategy Purchase goods or services IdentificationMarket EngagementProcurement FCP Process Stage 1 Market consultation FCP Process Stage 2 FCP Process Stage 3 Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Could FCP help deliver a solution? Recognise problems and unmet needs Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement FCP Process Stage 1 Could FCP help deliver a solution? Recognise problems and unmet needs Establish outcome based requirement Outcome s