Merchants urged to join OGC framework

Building merchants’ fears that they will be frozen out of a huge public sector commodities framework were dismissed this week by a leading government official.

The £1bn commodities framework, launched by the Office of Government Commerce (OGC) and the Northern Housing Consortium (NHC), aims to use the controversial method of reverse e-auctions to slash the cost of materials for public sector housing schemes by a third (CJ 21 June ).

The framework is based on a scheme piloted by North Tyneside council, which achieved savings of 24% on the price of materials.

However, the launch was met with merchants’ complaints that the framework would cut them out of the supply chain by going straight to the manufacturer.

The OGC moved quickly to calm merchants’ nerves this week, launching a marketing programme aimed directly at them.

Bruce Hartley, the OGC’s director in charge of developing the framework, insisted merchants were welcome and called on them to read the OJEU notice. "It says nothing about excluding the merchants. On the contrary, we want a diverse economy of suppliers on the framework ranging from regional suppliers and SMEs through to the manufacturers wanting to supply direct using their own logistical capability and including large merchants – that can present a huge range of commodities and with no requirement to go with one manufacturer."

Referring to claims from the Construction Products Association that reverse e-auctions are driven by the lowest price, Hartley said: "This is factually incorrect. You wouldn’t believe the effort we have put into ensuring quality. An e-auction is preceded by a professional procurement process, which assesses bidders on their financial, technical, logistical and quality capabilities."

Hartley said he was confident the contract would attract a broad cross section of interest, adding that nine firms had already registered expressions of interest in the first week.

Hartley called on the Construction Products Association to back the framework. However, the association’s chief executive Michael Ankers remained unconvinced and questioned the need for e-auctions to secure procurement efficiencies.

"I believe using the more traditional method of inviting integrated teams to bid on a more limited range of products over the long term can achieve all the savings delivered by reverse e-auctions without the risk of driving prices to unsustainable levels."

[Contract Journal, 19 July 2006]