On Tuesday 11th June and Thursday 13th June CHIC, in partnership with EN, held two roundtable consultation events to ensure that our new merchants framework meets current market need.
CHIC and EN will be using the market feedback from both sets of discussions to shape the new framework to ensure that we procure solutions that our members want and need.
Why There is a Need for a New Framework
The merchants and material supply sector has faced disruption from the COVID-19 pandemic and increased UK import costs, leading to raw material price hikes and market volatility. The merchant market has evolved in recent years through mergers and consolidations, reducing the number of merchants but strengthening some specialised solutions.
CHIC’s and EN’s Members have become more conscious of catalogue pricing and the volume of 'specials' purchased. Allowing operatives to buy products outside their core catalogue to reduce tenant waiting times has increased ‘specials’ purchases significantly. CHIC has engaged directly with suppliers and manufacturers, offering better supported rates and demonstrating increased savings and efficiencies through quarterly catalogue reviews. Our framework and DPSs provide a comprehensive merchant solution, including multiple merchants, branch networks and managed stores.
CHIC launched a new Merchant Framework in March 2019, an 8-year framework with call-off contracts permissible until 2027 and trading until 2029. The existing framework will continue to be utilised by CHIC and EN members, with quarterly catalogue reviews and regular management reports.
Although the current framework does not expire until 2027, market changes have prompted CHIC, in partnership with EN, to seek feedback to develop a new framework addressing all current and future needs.
Sector Requirements and Service Evolution
At the beginning of the year, through regular market engagement, CHIC’s Head of Merchant Services Giles Newman predicted that in 2024 many main merchants will scale back operations, reducing staff and branches. However, the merchant social housing market will remain robust and integral to future business plans, with a shift from smaller local stores to larger regional ones. Managed stores work well for members with condensed housing stock, but some organisations view them as excessive expenditure. Members are now separating their supply chain between more specialised suppliers.
Reprocurement is now timely, responding to market changes including mergers, acquisitions, macro environmental influences, inflationary pressures, sector disruptors and new ways of working. These elements necessitate a framework that adapts to changes and remains effective.
The sector's evolving requirements highlight the need for a flexible procurement strategy, balancing spot buying with long term strategic partnerships. Improved operative productivity and material standardisation is essential. Better use of technology and management information (MI) is needed to inform decision making and enhance operational effectiveness. Flexibility in the merchant supply chain is crucial and there's a strong desire for additional specialist services, such as glazing and waste management, to meet project needs.
Market Consultation
CHIC and EN have therefore started to shape a new merchants framework to be procured later this year and to be fully operational from 2025. We wanted to consult our stakeholders to test whether the lot structure of the framework and the procurement process are reflective of current needs and expectations.
We therefore hosted two roundtable market consultation events:
• Rotherham – Tuesday 11th June
• Milton Keynes – Thursday 13th June
These were attended by a range of consortia stakeholders, including:
• Members
• National merchants
• Regional / Local merchants
• Materials manufacturers
• Distributors or other suppliers
After a summary of the utilisation of the current framework, there was a briefing of forthcoming changes arising from the Procurement Act 2023, which becomes operational in October 2024. Delegates were asked to consider and advise on a range of specific questions.
The context will be a single framework, procured by CHIC for its own members and those of EN, where framework support – the consortia managed services – is a combined service.
LOT STRUCTURE, SCOPE AND PAYMENT OPTIONS
1. Do the suggested lots cover all requirements? And, 2. Should any be combined or separated?
Generally, the proposed Lot structure was accepted as logical and appropriate. However a few specific issues were raised that would need further clarification:
- Lot 6 – Merchant Consortia Managed Store – this Lot should encompass options for the store to be owned by the client (e.g. LA owned premises) or by a lead merchant
- Lot 7 – Specialist Materials – list of materials to be widened to include:
- heating spares
- insulation – which will itself need to be separated into different types
- Lot 8 – Tools – plant and hire
- redefine as ‘light’, i.e. tools and plant up to 1.5 tons
- consider separate workstreams for hire and purchase
- Lot not to include scaffolding
- Lot 9 – Waste Management – the details of this Lot need more development and market testing, particularly around legal responsibilities and data protection issues, when provided in conjunction with a managed store.
- Lot 11 – Retrofit Materials – EV charges to be added as a sub-Lot
- Lot 13 – National/Regional merchant representative organisations – this Lot was particularly supported, as it gives more opportunity to support SMEs.
3. How should CHIC & EN structure the framework pricing? And, 4. What is the right payment method (i.e members paying merchants) that best suits members systems? (e.g. Electronic Wallets)
Generally there was support for the current framework pricing approach with a schedule of specific items to be priced, together with a cost to save %.
SMEs should have contact details for branded manufacturers, so they can request the same rates as larger merchants. Care should be taken for tender pricing to be skewed by differences between branded and generic items. Standard 30 day payment terms were supported, with options for early payment discounts and for e-wallets to be considered.
MEMBERS NEEDS AND EXPECTATIONS INCLUDING PERFORMANCE AND PRICE MANAGEMENT
1. Do the proposed lots meet all of CHIC’s & EN’s Members needs?
Predominantly yes, there are challenges for some LA’s who might want to use for Civils/Corporate Materials supply, but it was agreed that is likely to be a separate framework.
The details of Waste (Lot 8) needs developing so that it reaches and attracts the right mix of providers.
Tool supply (sole) should be separated from Hire as Tool/Plant Hire providers can sell Tool/Plant but not the other way round and the accreditations required for Tool/Plant Hire need to be considered such as HAE (Hire Association of Europe) and CPA (assumed to be Construction Plant Association) for larger plant such as mini diggers and larger as well as accreditations such as the Safe Hire scheme. There is also demand for welfare hire and cabins to be included.
On the Click & Collect (Lot 10) should this also be click/collect and online only (ie delivered by post) – seen as regularising minor procurement/provision, but also some lack of control on product purchases as operatives could buy anything from online catalogues?
2. What are the Members expectations for:
a. Van/consignment stock
Feedback was that consignment stock is reducing across the membership and across the industry at large due to the practical issues of managing the risk and the enhanced financial and control risks that this creates for merchants. Consignment stock brings enhanced costs and administration. As Merchants have no control over operative behaviour in managing merchants stock on their vans it could lead to higher levels of stranded/obsolete stock risks within a contract.
Tender pricing should be based on a traditional van stock arrangements with a scope requirement of the framework stating that van consignment stock could be required, to be considered on a case by case basis.
b. Site deliveries
It was agreed that most clients would require some form of delivery but this is based on category (eg: heavy/light side) or void packs (not necessarily palletised) or for programmes of planned works. There is a cost to this over branch collection, dependent on the scale and nature of client requirements, the setup and capacity of the branch, and order value being delivered, as well as geography and spread.
There was a suggestion of a min order value prior to a delivery charge being levied which could also relate to distance. This could be an option at call off stage, so that the right resources can be included within a contract, we should consider a question within the tender as to whether pricing includes deliveries above a minimum order value/radius from branch, with a delivery charge allowable for distances beyond and/or below these order limits.
3. Is there a better way to manage contract performance and catalogue pricing?
a. KPIs & Targets
There was recognition that clients create different KPIs and MI to manage their contracts, however the most common requirements that could be assessed and measured across the board are:
1. On Time in Full
2. Invoicing Accuracy
3. Discrepancies
4. On/Off Catalogue spend and %’s
5. Volume/% of Specials
In addition, good practise Management Information is often required for contracts on:
1. Live Hire Weekly reports of what remains on hire and with who, along with total hire length
2. Hire provider to undertake anniversary calls every 4 weeks to operative with hire equipment
3. Specials weekly or monthly reports highlighting availability of ordered specials and whether now in stock to prevent stranded specials build up in stores and to enable outstanding jobs to be completed
Generally, feedback was complimentary on the activity that the Managed Service provides on price/ catalogue management activity with no additional requirements. It was agreed that reviewing prices on a quarterly basis was right in current market conditions.
b. Manufacturer Pricing
Feedback from merchants that embedding factory gate pricing consistently and transparently across merchants is likely to be a challenge, but acceptance that EN/CHIC need to do so on behalf of their customers.
4. How should the procurement explain members IT interface requirements?
It was agreed that two way data transfer (merchant/client) is crucial over the length of the proposed framework, as Customers and Suppliers become more data agile.
PROCUREMENT PROCESS AND SELECTION CRITERIA INCLUDING SOCIAL VALUE EXPECTATIONS
1. What is the preferred Procurement Process, to ensure a fair but robust selection process?
On balance, it was agreed that this would be best to under the new Open Framework of the Procurement Act 2023, with re-opening of the tender every 2-3 years, with a full period of 3 years. CHIC and EN should run a training session once the Procurement Act goes live to help assist and support the suppliers with the new portal.
2. How should the process compare Quality vs. Cost?
60% Quality (including 10% Social Value) /40% Price. The weighting should take Geographical location into account but this should not be scored so as to negatively impact smaller suppliers (which goes against the idea of the new Procurement Act).
With regard to Social Value, scoring responses should take into consideration the size of the company bidding as SV capability and track record will be commensurate with turnover.
3. Are there any key quality questions we should adopt (or not adopt)?
Quality questions should not be overburdensome. They should include some generic quality questions, applying to multiple Lots (to assist bidders for more than one Lot), as well as Lot specific questions.
Include question(s) on Delivering Value, New Technologies/Innovation, IT infrastructure, Quality Assurance, Stock Management.
4. What are the merchants challenges to deliver meaningful Social Value outcomes and how should we test this at tender stage?
A social value webinar or briefing session would be preferrable to ascertain exactly what CHIC and EN would expect to see , to reiterate the 1% commitment we ask for. Again, we must make sure the question and responses are linked to the supplier capability and size, and should also be linked back to the specification. CHIC and EN need to clearly demonstrate how the response will be measured.
The key conclusion from these groups was:
CHIC and EN should hold an in person tender walk-through session just before the tender goes live to take all prospective bidders through the consortia documentation and completion expectations. Our Social Value Manager(s) should also be present at this session to talk through the consortia expectations for social value quality responses.
Include a question on how the supplier can deliver value with new technology.
MANUFACTURER ENGAGEMENT AND COST TRANSPARENCY
1. How do we best ensure there can be effective manufacturer engagement in merchant contracts?
Constant communication is key. CHIC/EN should continue to bring merchants and manufacturers together, ideally on a quarterly basis.
Merchants and manufacturers would like to see greater transparency of order book, both at framework level (what opportunities are coming up) as well as at contract level (to control and optimise stock).
2. How should we best manage manufacturer pricing to ensure that manufacturers, merchants and members all get a cost competitive and fair deal?
CHIC and EN should strive for manufacturer pricing that is available to all merchants at a standard rate, irrespective of size or scale. Manufacturers are therefore clear about the price point and negotiations are centralised. Each merchant will have bespoke pricing for their own ‘cost to save’, determined by contract size, supply volumes, geography, service model etc. – but the supply price should be constant (with no rebates). Product standardisation across members and merchants should be continually promoted.
3. Are there any key manufacturers we should have apply to this framework?
The procurement should be widely promoted to all manufacturers, of all sizes. They should be encouraged to attend the pre-launch briefing, to determine if they consider submitting a tender is appropriate.
Some members may want some supplies from local manufacturers, which based on low overall volumes may not want or need to bid.
4. Are there any restrictions that merchants consider are necessary as to how CHIC/EN/Member interact with manufacturers?
Merchants would prefer to restrict members negotiating on prices directly with manufacturers, but acknowledge that through this type of framework ‘managed services’ central catalogue management by CHIC/EN will continue.
CONCLUSION
Both consultation events were well attended by stakeholders and the feedback was consistent. There is support for the new framework, to be procured as an Open Framework under the new Procurement Act, leaving flexibility to increase framework providers over an eight year term.
There was also strong demand to host a bidder’s briefing session before the formal procurement commences, to ensure that existing and new bidders fully understand the scope and the application process. CHIC and EN will therefore be hosting a briefing(s) in the Autumn of 2024.
Our thanks to all stakeholders who gave their time and expertise to make sure that our new merchants framework will be entirely fit for purpose.
