Supply chain advice pack: Procurement Routes: Dynamic Purchasing Systems (DPS)

What is a Dynamic Purchasing System (DPS)?

 A DPS is one of several different procurement routes available to public contracting authorities and is available through the Crown Commercial Service (CCS). It is an electronic procurement method available to all public sector and non-profit organisations.

 It is run in two-stage process, in stage one, all suitable suppliers who meet the requirements enter the DPS. This is followed by stage two, the contract award stage, where suppliers bid for the Works.

How is a DPS similar to other procurement routes?

 A DPS works very similarly to a conventional framework, allowing contracting authorities to search for services and access suppliers that provide the goods and services they require.

Also, in the same way a framework can be broken up into lots, a DPS can also be split into lots, usually by differing services and works requirements. Lotting allows for greater competition for the opportunities offered and therefore helps to achieve improved value-for-money.

Additionally, just like an electronic procurement system, the entire DPS process is electronic. A DPS also requires that suppliers meet the set criteria for joining, for example, they may be required to prove their financial stability. So, a DPS is, in many ways, just like other procurement routes, there are however, some crucial differences:

How is a DPS different to other procurement routes?

A DPS has several key features that make it fundamentally different from other procurement routes:

• A DPS is always open, or frequently reopens, to allow new suppliers to join (unlike a framework which has set application windows).
• The pricing for a DPS contract is decided at the contract award stage (not fixed at the point of tender like in a framework).
• A DPS does not allow for direct award (as they are meant to encourage greater competition – the only award mechanism on a DPS is through a mini-competition).
• The number of suppliers that can join is unlimited (assuming they meet the criteria, whereas in a framework there are a limited number of places for suppliers).
• A DPS has no time limitation (unlike a framework which is restricted to 4 years).

What are the advantages and disadvantages of a DPS?

The nature of each procurement route makes it suitable, or unsuitable, depending on the contracting authority or suppliers’ requirements. However, the way a DPS is set up broadly creates the following advantages and disadvantages:

Advantages of a DPS:

• Easier access for SMEs: The preliminary assessment stage is less intensive than a framework, facilitating greater access for smaller suppliers.
• Value-for-Money and Greater Competition: By allowing unlimited suppliers to join and not permitting direct awards, a DPS increases competition and therefore helps provide better value-for-money.
• Risk reduction: As suppliers can join at any time, a contracting authority is not stuck with the same suppliers through varying market conditions. Some firms may stop trading and a DPS would allow other suppliers to take their place.
• Simple to use: DPSs are easy to use for both suppliers and contracting authorities.
• Timesaving: Using a DPS can speed up the procurement process, a simple procurement may be initiated in as quickly as 10 days.

Disadvantages of a DPS:

• Wider Scope: As a DPS does not allow for direct award, it would be an unsuitable route for procuring a very specific service due to its inherently competitive nature.
• Rates and Pricing Uncertainty: Unlike a framework, rates and pricing is decided at the contract award stage, meaning that suppliers can adjust for each competition.
• Administrative effort: It can be a labor-intensive task to pre-qualify and add new suppliers to a DPS, particularly if there are lots of suppliers.
• Limited utility in specific sectors: DPSs may not be suitable in fast-moving, high-tech sectors like IT, due to their broader supplier scope and focus on competition.

DPS for the supply chain

Using a DPS works best for contracting authorities seeking common goods and services or innovative options in new markets. They allow quick, widespread market engagement and encourage competition, which helps to provide value-for-money without being locked into a framework.

As a supplier, bidding for a place on a DPS can be an effective way to access opportunities. The initial assessment stage is less labour-intensive than under a framework, and the ability to join at anytime allows a supply chain organisation to operate under less time restrictions, providing greater flexibility.

Additionally, the ability to adjust rates and pricings enables suppliers to better respond to fluctuating market conditions. This flexibility also allows for easier exits from the DPS and the ability to bid for more suitable work packages – enabling smaller businesses to access to large projects. 

The faster contract award process that a DPS facilitates can also help the cash flow of SMEs and other suppliers, and the time saved in the application processes also helps to keep costs down. If an authority opts to utilise a DPS, it can often be beneficial for suppliers to explore getting on the DPS.

Ultimately, which procurement route a contracting authority chooses depends on the nature of the procurement exercise: What is being procured? What are the needs of the contracting authority? In what market or sector will the procurement be carried out?

 They do, however, prevent authorities from directly awarding and are therefore unsuitable for catalogue requirements or for immediate delivery of specific services from pre-chosen suppliers.

It is therefore crucial that proper understanding of the available procurement routes and the specific requirements of the contracting authority are understood before making a decision on which route to choose. Improper procurement can be costly, both financially and reputationally, putting an authority at risk of legal challenge and extensive cost.

How will DPSs change following the Procurement Act 2023?

The Procurement Act 2023 brings with it differing procurement regulations from the PCR2015, it is important to keep well informed of these changes and the requirements for both suppliers and contracting authorities.

As part of the new Act, a new version of DPSs will be introduced, Dynamic Markets. These will be very similar to DPS, working in mostly the same way. Dynamic Markets, however, will have increased transparency measures e.g., more notices within them and will be able to be used for a wider range of goods and services. They are designed as an improvement upon DPSs, allowing for more widespread use.

Useful links

Dynamic Purchasing Systems: Dynamic Purchasing Systems - CCS

What is a Dynamic Purchasing System?: What is a Dynamic Purchasing System? – Procurement Essentials - CCS

PA2023: Frameworks and Dynamic Markets: Module 5: Frameworks and dynamic markets - GOV.UK