Response to consultations on proposals for arrangements from April 2023

Consultation findings – market feedback on proposed procurement characteristics

In addition to the topics covered in section 6 above, the consultation with the market sought feedback on PSAA’s initial thinking on the key characteristics of a potential procurement strategy. The findings are described below.

Procurement aim and objectives

All market respondents (100%) supported our proposals.

PSAA response: No change to the proposed aim and objectives. We will continue to engage with the market until the formal commencement of the procurement to inform the development of and to “road test” various aspects of our approach as it is further developed.

Procurement route

All market respondents (100%) supported our proposals. One respondent noted the requirement for auditors to be registered and commented that “the registration process needs to encompass a wider picture and not focus purely on ‘relevant public sector experience’ as this is a barrier to entry.”

PSAA response: No change to the original proposal to follow the Restricted procurement procedure. We are aware that MHCLG is currently consulting on its proposals for ensuring the supply of appropriately experienced and qualified local authority auditors, including amending guidance related to Key Audit Partners. We will keep our approach under review as we are mindful of the potential for change that might attract additional capacity into the market, which we would want to reflect in our audit services procurement strategy.

Establishment of a DPS in parallel for future use

Again, all market respondents (100%) supported our proposal. One respondent highlighted an advantage of a DPS model could be to stagger future tenders through variability in contract term.

Potential areas of concern were expressed by two respondents (shown below), however, neither are proposed features of our approach.

  • the requirement to be delivering work under the main procurement to be considered for any subsequent appointment under a DPS procurement; and
  • we would not wish to see contract awards changed once made unless there is a specific requirement to do so.

PSAA response: We will establish a DPS as proposed.

Lot structure, composition, and size

Our consultation posed several questions in relation to our proposals for lot structure, composition, and size, and the collective findings are set out below.

Overall there was a mixed response from the market to our proposals, but this provided us with helpful insights.

There was broad support for an increased number of lots, with some respondents indicating individual preferences about lot sizes, lot composition and maximum volumes of work to be awarded to any one bidder.

Our proposal to accept bids from organisations working as a consortium or in some form of joint working arrangement (rather than joint audit) attracted equal numbers who supported it and those who did not (the latter group expressing concerns of risks to quality and reputation).

Two respondents referenced the risk that our proposed approach could result in a small number of bidders winning the majority of the lots. PSAA is mindful of this risk and is seeking to strike a balance between allowing bidders to win work up to their capacity, and achieving a broader distribution.

Fewer than half (40%) of market respondents were supportive of our proposal to apply a geographical premium where there is no alternative to appointing an auditor to an audit in an area that is least attractive to the audit firm. Three respondents offered differing alternative suggestions.

One respondent suggested that at least some of the lots should exclude any audits designated as Public Interest Entities.

PSAA response: We will re-examine our proposed approach to lot structure, composition, and size in light of the market feedback. We will continue to engage with the market until the formal commencement of the procurement to inform the development and to “road test” various aspects of our approach. Given the potential for change that influences the market over the next six months, we will keep our lotting approach under review, and reference the potential for further change in our procurement strategy.

Support for potential suppliers to enter the market

All market respondents addressed this question, with the vast majority indicating the need for a system-wide approach.

Some respondents commented on individual aspects of our proposals including the basis on which a decision may be made to either enter into new long-term contracts or extend the current contracts, lot composition, and the fee variation process.

PSAA response: We will consider the feedback as we develop proposed contract terms for the next procurement. Fee variations will continue to be processed in accordance with the regulations, which currently require a case-by-case consideration of each proposed variation.

Basis for pricing and ways to seek to reduce bidder uncertainty

The proposal set out five potential ways in which PSAA might seek to reduce uncertainty for bidders.

Overall, the market’s view was mixed with some support for some of the individual options we proposed. However, there were a greater number of respondents’ who expressed concerns on the proposed basis for pricing and fee variations.

PSAA response: We will re-examine elements of our proposed basis for pricing in response to feedback to see if other viable options exist that can be delivered in accordance with the regulations.

Indicative procurement timetable

Once again, the market’s view of the proposed timetable was mixed. Those respondents with NHS audits in their portfolios expressed concern, requesting the tender return date was moved to either before mid-April 2022 or commencing mid-July. The proposed timetable was supported by the remaining respondents.

PSAA response: It is not feasible to bring forward the date of tender return as the deadline for eligible bodies to accept the opt-in invitation is not until 11 March 2022, and information on opted-in bodies will need to be provided in the ITT documents. The option to delay the tender return date until mid-July 2022 is possible, although it would compress the available time in which to consult with both audit firms and eligible bodies on proposed auditor appointments for the appointing period from April 2023. The regulations require the appointing person (PSAA) to confirm all auditor appointments by 31 December 2022. MHCLG officials have informed PSAA that they would be unable to amend the regulations within the required timeframe. We will review the auditor appointment process to assess the potential to compress the consultation process without detriment to conducting a meaningful process.

Key factors most likely to influence your firm’s decision to bid

Market respondents outlined the factors that they will take into account when considering whether to participate in the audit services procurement. This feedback aligned with responses received to other areas of the consultation.

PSAA response: We will consider the feedback as we develop the strategy and proposed contract terms for the next procurement.

Other issues that you wish to raise

More than half (60%) of respondents did not answer this question. The issues highlighted by respondents reiterated points covered in responses received to other areas of the consultation, namely the fee variation process and the basis for pricing. Several issues raised are directed at the wider local audit system, such as the need for early clarity on the future direction of local audit in the wake of the various government reviews, greater coordination across public sector relevant bodies of timetabling and supporting new entrants into the market.

PSAA response: We will we share the issues raised with MHCLG’s Local Audit Liaison Committee.

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