Services

Flexible Contracting - Collaborative Procurement

Flexible pricing is the alternative to Fixed term Fixed Price (FTFP) tendering and is where multiple purchases of blocks of energy can be made before and during the contracted supply period. Purchases are broken down into blocks, commonly referred to as clip sizes, which in turn build up to the required volume an organisation is forecast to consume across each annual period. There is no reliance on settling all the required volume on one day and in one single transaction, however, all energy requirements can be met prior to contract commencement if required. The flexible product enables access to shorter term energy markets where purchases can be made closer to delivery. Purchasing on the shorter term markets reduces the supplier's risk premium in comparison to FTFP contracts.

With regard to public sector purchasing, the collaborative purchasing strategy developed by UX has been modelled from the national Collaborative Energy Review Project led by the OGC, which is endorsed as best practice by the Centres of Excellence. With regard to private sector purchasing, the principles of flexible contracting will mirror a similar model, but reflecting a greater appetite for risk and flexibility in approach to purchasing models. Clients can join the arrangement at any point, but may also at any time revert back to the FPFT methodology whilst remaining on contract.

By purchasing collaboratively, public authorities or private sector organisations which may not have had the volume to purchase on a flexible arrangement can now do so and in addition by increasing the purchase block size through aggregation of volume, achieve more competitive block prices. Supplier's selling energy in advance take the risk that if the market moves against them, energy has to be sold under market value or even at a loss, at the time of delivery. In FTFP contracting all that risk is taken by the supplier, for which they charge a premium. In flexible purchasing the buyer takes on some of that risk, hence the need for a comprehensive risk management strategy.

UX adopts a relatively low risk strategy with each client, agreeing a risk strategy to cover purchasing methodology and is set out to ensure annual cost certainty. Whilst looking to take advantage of falling market prices, stop losses will be agreed to stabilise purchasing decisions and protect clients from rising market conditions. The aim is to ensure decisions remain closer to the market conditions and therefore benefit when markets are on a downward curve.

Clients are supported with daily, weekly, twice monthly and bespoke market intelligence reporting, including VAR reports and access to live market data.

If you would like to know more about flexible contracting and our associated services, please contact your Account Manager or call our head office to make an appointment.