Choose whether to plan for scale

Investing the time into an innovation buying pathway, and eventually a procurement strategy, that covers the market approach for testing as well as scale, brings several advantages.

• Avoid delays in scaling successful trials by investing time up-front in a multi-stage sourcing strategy and good governance structures for each stage.
• Collect evidence from proof stages to inform business cases for funding of later stages.
• Gather market evidence to justify limited tendering or direct negotiation if unable to attract suitable competition.
• Refine problem statement and requirements within the procurement process without starting a new procurement.
• Attract a broader range of solutions and the best suited suppliers by signalling the full extent of the scale opportunity, and even more if paying for trials.
• Test and evaluate solutions of varying types or maturity.
• Test new solutions relatively quickly before committing to implementation at scale.
• Carry out multiple stages of proof to gradually narrow the field before implementation.
• Work with multiple suppliers concurrently or even uncover collaboration opportunities and multiple ways to solve problems.
• Retain the right to stop engagement at any stage if criteria are not met.

Planning for scale may call for greater time and resource investment than a project can support, due to the complexity of:

• Integrating all aspects of a procurement strategy across multiple stages
• Planning ahead for budgets, staged deliverables, evaluation criteria and contracting
• Creating management structures to manage uncertainty and change
• Risk and change appetite of the business
• Active engagement of sponsors and governing groups
• The skills and resources needed to navigate the procurement policy landscape

The buyer should always consult with their agency procurement team to ensure their procurement approach meets business objectives and consult the NSW Procurement Policy Framework and Enforceable Procurement Provisions (EPP) before proceeding.

Step 1: find out more about the market. Policy and guidance references: 

• The NSW Procurement Policy Framework encourages engaging with industry and adopting multi-stage market approaches.
• The enforceable procurement provisions provide for market engagement to help develop requirements, however buyers should ensure engaged suppliers do not have an unfair advantage if they are to participate in tenders.
• Guidance from the construction sector encourages interactive tender processes including a probity advisor to manage risks.
• Sourcing templates are available on buy.nsw and through agency procurement teams, and innovation buying project examples can be requested by emailing InnovationProcurement@customerservice.nsw.gov.au
• Consider intellectual property (IP) implications for supplier engagement that informs a market approach – communicate the default position to suppliers and have a plan to manage any IP.
• Seek guidance from your agency’s ICT team on guidance or policies that apply to certain technology domains, e.g. AI Assessment Framework.

Step 2: go to market. Enabling provisions/guidance:

• If the value cannot be estimated, it is taken as >$680k.
• If using the ICT Services Scheme, accredited agency rules have precedence. Unaccredited agencies should consult procurement board direction PBD 2020-05 for use of the scheme.
• If engagement is >$680k and not using ICT Services Scheme, EPP clause 13 requires an open market approach. Limited tendering is permitted for urgency, lack of alternative, not feasible to change supplier or for a prototype under EPP clause 15.
• The ICT Purchasing Framework is mandated for all ICT/digital products and services.
• Set up transparent communication and documentation processes when working with multiple vendors to ensure probity and confidentiality risks are managed.
• Consider IP implications for a supplier participating in proof stage that informs later stages.

Step 3: implement at scale. Enabling provisions/guidance:

• The ICT Purchasing Framework explains how to select and use the appropriate agreement when buying ICT/digital products and services.
• Limited tendering may be justified under limited circumstances as described in the EPP, your procurement team can advise you on whether your circumstances are justified.

• Get a better understanding of the problem space, potential solutions, and scope of a competitive tender by testing without commitment.
• Collect evidence to inform a business case and seek funding for scale implementation through a well-designed trial to prove the value of an initiative.
• Using available budget or demonstrating progress may be beneficial enough in the short term to offset the longer term costs in time or effort to run a competitive tender later.
• If there is high confidence that a preferred supplier is ‘unique’, an independent entity may be able to validate this to avoid a competitive tender before scale implementation.*

*Buyers should seek agency advice on what counts as evidence of uniqueness to justify direct negotiation.

• Successful proofs of concept or trials may not be able to scale and/or may need to be rolled back.
• Lengthy delays incurred by needing to return to market.
• High risk of compromising intellectual property from the tested solution when returning to market.
• Investment in successful research and development may not show a return if the goal was to develop a product or service that NSW Government can buy.
• Testing conducted through a direct engagement or limited market approach is unlikely to be able to demonstrate that the solution is the best fit or value for money.
• Perception of unfairness in a subsequent tender for suppliers not involved in trials or proofs.
• Poor experience for suppliers who invest in proving their solutions with no clear procurement pathway.
• Fewer suppliers putting forward proposals without a clear reward at the end of the process. 
• High risk of vendor lock-in and scope creep.
• When technology is evolving rapidly, any unnecessary delay between testing and implementing might mean the market has changed.

Under certain circumstances, and with an understanding of the impact on further procurement, buyers may wish to quickly engage a supplier for testing and learning without planning for multiple procurement stages. The following non-exhaustive list of information sources may help with this option, however buyers should always consult the NSW Procurement Policy Framework and Enforceable Procurement Provisions (EPP) before proceeding:

• The enforceable procurement provisions provide for market engagement to help develop requirements, however buyers should ensure engaged suppliers do not have an unfair advantage if they are to participate in tenders.
• The NSW Procurement Policy Framework encourages engaging with industry and adopting multi-stage market approaches.
• The NSW Procurement Policy Framework provides for direct negotiation with certain businesses like small to medium enterprises, aboriginal businesses and disability employment organisations.
• Use of the ICT Services Scheme is governed by a Procurement Board Direction and accredited agencies may have additional rules.
• Unless using the ICT Services Scheme, an open market approach is generally required except under some circumstances described in the EPP.
• Direct negotiations should be informed by the NSW Government Direct Dealing Guidelines.
• The ICT Purchasing Framework explains how to select and use the appropriate agreement when buying ICT/digital products and services.
• Plan for handling intellectual property from suppliers participating in proof stage and carefully manage how it informs any future tender.
• Set up transparent communication and documentation processes when working with multiple vendors to ensure probity risks are managed.

Note: If the procurement value can’t be estimated, assume the enforceable procurement provisions apply