Aggregation of demand doesn not mean aggregation of supply. Splitting contracts into "lots" is a straightforward way of enabling both small and large suppliers to compete on equal terms and is in line with the Wales Procurement Policy Statement. By tendering the lots at the same time, this avoids the danger of dis-aggregating demand and being non-EU compliant. Lots can be split in any way - product or distribution area being the most obvious - and suppliers can bid for some or all lots.
Within product groups, this be can further sub-divided (e.g. prepared and non-prepared vegetables), or services can be separated (e.g. tendering separately for food and distribution). Servicing smaller lots enables smaller suppliers to develop competencies, and reduces risk of over-reliance. Similarly, if a lack of competition has developed, appointing new suppliers to small lots allows confidence to be built while reducing service risk, and developing a better long-term competitive base.
The procurement function must, however, make an assessment of the cost / benefit of an approach which results in handling a larger supplier base. Additional strategies to reduce process cost (e.g. Welsh Purchasing Card or E-invoicing) may allow greater flexibility with the use of lots, provided small suppliers become E-capable. Food contracts already carry a high administrative cost due to market price fluctuations.
It is recommended that lots are used as standard practice. We also recommend moving over time towards increased cross-sector collaboration that will allow a regional approach to lots.
Sustainable food procurement can have positive effects on the environment, economy and society.