Flexible procurement with Dynamic Purchasing System

Traditional Framework agreements can be restrictive, with set entry periods and limited slots for suppliers. However, the Dynamic Purchasing System (DPS) changes the game. It allows suppliers to join at any point in time, ensuring a constant stream of new businesses, stimulating competition and innovation. 

In this blog, we’ll explore the fundamentals of the DPS and how it differs from Framework agreements. We will provide insights on when a DPS might be suitable for your organisation and your procurement needs.

In this article:

• What is a Dynamic Purchasing System?

• The difference between a Framework agreement and a DPS

• Why you should consider using a DPS

• How does a DPS work?

• Implementing DPS in Mercell

• DPS’s flexibility by design

What is a Dynamic Purchasing System? 

A Dynamic Purchasing System (DPS) is a flexible alternative to traditional procurement methods, such as the Framework agreement. Suppliers can join a DPS at any time, enabling buyers to select the best supplier to meet their procurement needs whenever they arise. This keeps the system fresh and dynamic, continually welcoming new businesses during the agreement period. 

A DPS is a two-staged process. It contains both the qualification stage in which suppliers ask to join the DPS, and the call-offs where the buyers announce their procurement needs. You can see a DPS as a list of pre-qualified suppliers ready to respond to the buyers’ call-offs. 

This all-electronic procedure is used to procure ‘off-the-shelf’ goods, services and works where the scope or volume of the agreement is unknown, such as office supplies, solar panels and bulk commodities. For these types of procurement, a DPS reduces the lengthy timelines associated with standard procedures.  

The difference between a Framework agreement and a DPS

An alternative to a DPS is a Framework agreement. The key difference between the two is flexibility. Suppliers can join a DPS at any time during its lifetime, allowing buyers to build a pool of suppliers to call upon whenever they need. In contrast, a Framework agreement has a restrictive application window and strict selection criteria. This favours larger companies and leaves SMEs and start-ups with fewer chances. 

The DPS, on the other hand, offers the option to have a lower threshold for SMEs and startups, making it more accessible and promoting a more inclusive market environment. There is no limit on the number of suppliers in the qualification stage in a DPS, whereas in a Framework agreement, the number of suppliers is fixed. This inclusivity ensures that buyers have access to a wider range of innovative solutions and competitive offers.  

A DPS and a Framework agreement can be used in different situations. When a Framework agreement is unsuitable, a DPS offers a flexible alternative. This procedure can be well suited for specific cases, for example when you want to procure power or personnel. 

Why you should consider using a DPS

A Dynamic Purchasing System has various benefits for both buyers and suppliers. These are the main reasons buyers choose to use a DPS in their procurement process: 

1. A DPS ensures a competitive and dynamic market. 

A DPS ensures competition by continuously allowing suppliers to join during its duration. This characteristic offers SMEs and start-ups the opportunity to compete with other (larger) organisations, starting from the first euro. If there is a lot of availability, a DPS can cause pressure on the prices which could be beneficial for you as a buyer. 

2. A DPS streamlines the procurement process.

Since there is already a list of eligible suppliers, simple call-offs could be  completed within a minimum of 10 days. Buyers can issue call-offs directly to pre-qualified suppliers, accelerating the overall process. The Directorate-General for Informatics department in the EU Commission experiences an 80% decrease in lead time by using a DPS. You can read their story here.

3. A DPS broadens the market. 

A DPS opens the door to a wider range of suppliers, whereas traditional Frameworks exclude suppliers after the initial tendering phase. The application process for a DPS is generally more accessible, allowing suppliers to apply without worrying about hard deadlines. This open method attracts suppliers with different capabilities, expertise, and offerings, enabling organisations to tap into a broader range of specialised or niche suppliers. This diversity drives industry innovation and ensures buyers benefit from unique supplier offerings.

Is a DPS the right fit for your procurement needs? 

Considering a DPS for your organisation? It offers great potential, but it's crucial to understand the limitations before implementing one.

• As more suppliers join your DPS, the supplier pool can become large. Mercell’s DPS lets you use categories to keep your supplier list organised. With category management, you can set up a call-off with the selected and qualified suppliers effortlessly. If you prefer a smaller pool, a Framework agreement might be more suited to your needs.

• A DPS requires ongoing (administrative) management, since suppliers can continuously apply. You have to manually evaluate whether every applying supplier meets your requirements. If your organisation doesn’t have the resources for this time demanding task, then another procedure might be a better fit. 

• A DPS is excellent for procuring commonly used goods and services with a pool of suppliers available. Suppliers are selected on a bid-per-bid basis without a guarantee of continued engagement beyond every contract. Therefore, as a buyer you might miss out on the benefits from a long-standing relationship with the supplier. If you're looking to develop long-term strategic supplier relationships, consider using a Framework agreement instead.

How does a DPS work? 

A DPS is popular in some European countries for one main reason: suppliers can join anytime, without waiting for the next procurement cycle. It runs on a two-stage process. First, during the initial setup, all suppliers meeting the criteria are admitted—there's no limit on how many can apply. Second, contracts are awarded. The contracting authority invites all suppliers in the DPS or within a relevant category to bid.

Here is how it works: 

Stage 1: Qualification

When setting up a new DPS, the initial application period is a minimum of 30 days. Suppliers can apply to join anytime throughout the DPS’s lifetime. All suppliers who meet the set criteria are admitted, ensuring a wide and competitive pool of suppliers. If a supplier doesn’t meet the criteria initially, they can re-apply whenever they do meet the criteria. 

Using the various categories within the DPS, you can create a tailored shortlist of suppliers. These categories allow you to filter suppliers based on specific capabilities, credentials or location, ensuring you have the best possible match for your procurement needs.

Stage 2: Call-off

When your procurement need arises, you can invite suppliers to tender. With Mercell’s templates, setting up the competition is easy, and qualified suppliers are automatically selected. In the call-off, you have all the relevant information in one overview. As the contracting authority, you must invite all suppliers on the DPS to bid for the contract. After evaluating the bids, you can award the contract to the best supplier.

Implementing DPS with Mercell

Mercell fully supports the Dynamic Purchasing System (DPS) procedure by offering a comprehensive electronic platform that simplifies the procurement process. This enables buyers to efficiently acquire off-the-shelf goods, works, and services, while maintaining high standards of quality and compliance. The platform’s extensive pool of suppliers, combined with the use of templates, makes creating new call-offs quick and easy. This results in reduced lead time and minimised errors through centralised template management and an approval workflow.

Mercell’s platform further enhances DPS with dashboards that streamline category management, automatically selecting qualified suppliers and expediting call-off setups. All related information is centrally stored, providing a clear and organised overview of statuses and results. The platform also facilitates smooth communication with suppliers through automated notifications, ensuring an efficient procurement process.

Flexibility by design with DPS

While the Dynamic Purchasing System may not be as well-known as traditional Framework agreements, it offers great potential for organisations looking to procure commonly used goods, services and works of which the volume or scope of the agreement is unclear. Its flexible and open approach creates a dynamic marketplace that ensures competition and SMEs to join anytime. This inclusivity brings a diverse range of suppliers to the table, driving innovation and local markets. 

Discover the possibilities for flexible procurement with a DPS. Read more here or get in touch.