How can you mitigate the risks associated with reliance on a single supplier in public procurement?

At a time when securing supplies has become a major challenge for businesses and public bodies, dependence on a single supplier represents a major strategic risk. In public procurement, where competitive tendering and transparency are fundamental principles, the concentration of purchases with a single supplier can give rise to financial, contractual and operational vulnerabilities. So how do you limit these risks and secure contract performance while complying with regulatory requirements?

The dangers of over-reliance on a single supplier

Securing purchases from a reliable service provider may seem reassuring, but when the latter becomes unavoidable, a number of risks emerge: 

• Limited negotiating power: When a supplier knows that it is indispensable, it can impose its own pricing conditions or reduce its commitments in terms of quality and lead times, thereby weakening the public purchaser.
• A risk of service interruption: Bankruptcy, legal disputes, logistical difficulties or a geopolitical crisis affecting the supplier can jeopardise the performance of the contract, resulting in delays and additional costs.
• Lack of innovation and competitiveness: The absence of competition can slow down innovation and the continuous improvement of services, preventing public purchasers from benefiting from the best solutions available on the market.
• Increased exposure to legal risks: In public procurement, the automatic renewal of contracts without competitive tendering can be legally challenged, exposing the purchaser to penalties or contract cancellation.

What are the strategies for limiting dependence on a single supplier?

Rather than suffering this dependence, a number of strategic levers can be used to diversify sources of supply and reduce risks. 

• Encouraging competition and diversification of suppliers: One of the first solutions is to segment requirements and structure contracts into lots to allow several suppliers to participate. This approach encourages the diversity of suppliers and guarantees an alternative in the event of the failure of a key player.
• Multi-award framework agreements: Rather than signing a contract with a single supplier, multi-award framework agreements make it possible to retain several service providers for a single requirement. Depending on the requirements, successive orders can be awarded on an alternating basis or according to performance criteria.
• Develop a proactive sourcing strategy: Anticipating the risks associated with dependency requires active market monitoring and diversification of supply sources. Identifying new suppliers, supporting SMEs and opening up to innovative solutions are all avenues to explore.
• Contractual framework for supplier commitments: If dependence on a single supplier is unavoidable (e.g. monopoly, exclusive technology), strict contractual clauses should be included in the contracts. These clauses can include service continuity obligations, sufficient notice periods in the event of termination, and penalties in the event of non-compliance.
• Exploring opportunities for pooling and cooperation: Some public bodies can limit their dependence by pooling their purchases with other organisations via central purchasing bodies or grouped orders. This approach makes it possible to secure supplies while benefiting from better contractual and pricing conditions.

Conclusion: proactive management to limit risks

In an environment where supply chains are becoming increasingly fragile, dependence on a single supplier is a risk to be anticipated in any public procurement strategy. A proactive approach, combining competitive tendering, supplier diversification and a contractual framework, is essential to guarantee continuity of service, competitive prices and greater purchasing resilience.  

• Source: Federal Public Service Economy (SPF Économie, Belgium) - Legislation and Legal Framework for Public Procurement in Belgium
• Source: Belgian Federal Public Service Policy and Support (BOSA, Belgium) - Best Practices in Public Procurement and Competitive Bidding
  
• Source: European Court of Auditors (ECA, European Union) - Risk Analysis in Public Procurement – European Court of Auditors
• Source: Organisation for Economic Co-operation and Development (OECD) - Optimizing Public Procurement and Preventing Supplier Dependency