Third-party framework
agreement providers offer pre-established contractual arrangements that
contracting authorities can access without running a competitive tender. While
lawful in principle, such frameworks are often criticised for bypassing the
open, competitive processes required by the Procurement Act 2023. This
convenience can reduce market competition, limit supplier diversity, and
undermine transparency in public procurement.
These providers
frequently include Consumer Price Index (CPI) or Retail Price Index (RPI)
annual pricing clauses, allowing suppliers to increase prices in line with
inflation. Although intended to protect suppliers from rising costs, such
uplifts can escalate public spending, particularly given the compounding effect
of such pricing clauses over many years. Without competitive retendering or
performance-based controls, these adjustments risk eroding value for money as
defined by HM Treasury’s Managing Public Money.
A recurring concern is
that these frameworks are used to circumvent full procurement exercises,
favouring expedience over compliance. By awarding contracts through
pre-existing agreements, authorities may avoid regulatory scrutiny. This
practice reduces opportunities for new market entrants, stifles innovation, and
risks creating perceptions of unfairness or predetermined contract outcomes in
the public sector.
Some frameworks may
permit contracts exceeding four years without clear justification, contrary to
HM Treasury's Managing Public Money principles. Such arrangements can lock
authorities into outdated pricing and service models, with limited flexibility
to adapt to market changes. Without regular competition, suppliers may lack the
incentive to innovate, maintain service quality, or deliver cost efficiencies
over time.
Failure to align
framework use with statutory and Treasury requirements can lead to audit
criticism, legal challenge, and reputational harm. Contracting authorities must
ensure that any use of third-party frameworks is objectively justified,
proportionate, and demonstrably delivers value for money, while adhering to the
core principles of transparency, fairness, and open competition in procurement.
Third-Party Framework
Agreement Providers
Third-party framework
agreement providers have become a prevalent mechanism within UK public
procurement. These organisations act as intermediaries, offering
pre-established contractual arrangements that public sector bodies can access
without undertaking a direct competitive tender process. Their appeal lies in
perceived convenience, reduced administrative effort, and the assurance of
pre-vetted suppliers. However, this arrangement often raises questions about
transparency, compliance, and adherence to the statutory duties imposed upon
contracting authorities under the Procurement Act, particularly regarding open
and competitive procurement principles.
Such providers
frequently operate as commercial entities independent of the contracting
authority. They compile frameworks with a panel of suppliers, offering services
or goods under pre-agreed terms. While this approach may reduce procurement
lead times, it may also reduce the level of competition and innovation
available in the market. The extent to which these arrangements achieve genuine
cost savings and deliver value for money has been the subject of debate within
both the public and private procurement sectors.
The growing reliance on
such providers has prompted increased scrutiny from auditors and regulatory
bodies. Concerns have been raised about whether the use of these frameworks
aligns with the statutory requirement for contracting authorities to act transparently,
treat suppliers equally, and avoid distorting competition. In some cases, the
use of third-party frameworks has been perceived as a way to sidestep
legislative safeguards intended to protect public funds and ensure fair market
access for suppliers.
Critics argue that
while the frameworks are lawful in principle, their application can sometimes
result in outcomes contrary to the spirit of UK procurement law. This includes
instances where contracting authorities bypass competitive processes entirely,
awarding high-value, long-term contracts via frameworks without rigorous
challenge, thus potentially undermining the open market and the equitable
treatment of suppliers, particularly smaller enterprises seeking fair access to
public sector opportunities.
Consumer Price Index and Retail Price Index Annual Pricing Clauses
One notable feature in
many third-party framework agreements, as in the vast majority of public
contracts and framework agreements, is the inclusion of Consumer Price Index
(CPI) annual pricing clauses. These clauses allow suppliers to adjust their
prices annually in line with inflation, as measured by the CPI, or in the
worst-case scenario, the Retail Price Index (RPI), which is generally the
higher of the two pricing mechanisms. While this provides suppliers with
financial stability and protection from cost fluctuations, it can significantly
impact the total expenditure of the contracting authority over the life of the
contract, especially where frameworks extend for multiple years without
competitive re-tendering.
The automatic
application of CPI uplifts may reduce incentives for suppliers to improve
efficiency or deliver cost savings. Unlike competitive tendering processes,
which drive price competition, such clauses can create a ‘cost ratchet’ effect,
where prices only move upward regardless of market conditions. This effect can
be particularly problematic in markets where technological advancements or
economies of scale might otherwise lead to cost reductions over time.
From a fiscal oversight
perspective, these clauses can undermine value-for-money principles in HM
Treasury’s Managing Public Money guidance. Contracting authorities should
challenge cost increases and ensure adjustments are justified by market
conditions or supplier performance. Automatic CPI uplifts without benchmarking
risk a breach of this obligation. Relying on CPI or RPI-linked pricing in
long-term agreements can inflate public spending, complicate budgeting, and
invite scrutiny from auditors and oversight bodies. It also raises broader
questions about allocating inflation risk between the public and private
sectors in publicly funded contracts.
Circumvention of
Competitive Procurement Requirements
A central criticism of
specific third-party framework arrangements is that they are used to circumvent
the requirement for contracting authorities to undertake competitive
procurement in compliance with the Procurement Act. By joining an existing
framework, an authority can directly award a contract to a supplier without
issuing an open tender, thus avoiding the time and scrutiny associated with a
regulated procurement process.
While third-party
framework usage is permitted under UK procurement law, it intends to streamline
procurement in genuinely repetitive, standardised areas, not to bypass
competition entirely. Misuse occurs when authorities select frameworks
primarily to avoid the administrative effort, oversight, or challenge that
comes with full tendering. This can lead to anti-competitive outcomes and
reduce opportunities for new market entrants to win public contracts.
Such practices can also
undermine the policy objectives underpinning procurement legislation, which
seek to promote innovation, improve supplier diversity, and deliver better
public outcomes through fair competition. When frameworks are repeatedly used for
bespoke or high-value requirements, this can distort the market, favour
incumbent suppliers, and reduce incentives for suppliers to offer competitive
pricing or improved service quality.
Regulatory bodies,
including the National Audit Office, have highlighted the risk that
over-reliance on such frameworks may erode public trust in procurement. If
suppliers and the public perceive that contract awards are predetermined or
lack transparency, confidence in public sector procurement diminishes,
potentially deterring capable suppliers from participating in future tenders.
Non-Compliance with HM
Treasury’s ‘Managing Public Money’ Guidance
HM Treasury’s Managing
Public Money sets out the value-for-money obligations for all public
expenditure, emphasising the need for efficiency, effectiveness, and economy.
One area of concern is that some third-party frameworks permit contracts of
longer than four years without clear justification, contrary to best practice
recommendations. Extended durations, especially where they are non-competitive,
can lock the public sector into unfavourable terms and restrict flexibility to
adapt to changing needs or market innovations.
Long-term commitments without market testing risk embedding outdated technology, service models, or pricing structures. Over time, this can erode service quality and value, as suppliers may have little incentive to innovate or remain cost-competitive. The Treasury’s guidance stresses periodic review and re-procurement to ensure ongoing alignment with public interest objectives and market developments.
The issue is compounded when frameworks are structured to allow ‘call-off’ contracts with lengthy durations that extend well beyond the original framework term. In such cases, the authority may be bound to suppliers under conditions that have not been tested against current market offerings, undermining both value for money and the fairness of competition, and more importantly in contravention of HM Treasurys general principle of a four-year contract or framework agreement threshold.
Failure to comply with
the principles of Managing Public Money can have significant consequences,
including audit criticism, reputational damage, and potential legal challenge.
Contracting authorities must be able to demonstrate that any departure from competitive
procurement or standard contract durations is objectively justified and
consistent with their fiduciary duty to safeguard public funds.
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