Panels (or framework agreements, lists of prequalified suppliers, standing offer agreements, registers, take your pick) are a widely used solution for the procurement of categories as diverse as professional services, ICT, construction, advisory and contingent labour. The reasons for their popularity are simple: panels are efficient, low risk and audit safe. Perhaps because of their popularity (at least with procurement practitioners), once established, they tend to stick around. But if you read audit reports or talk to suppliers or look at how panels actually get used, a more uncomfortable story emerges.
What the auditors keep telling us (whether we listen or not)
The primary procurement process (selecting the participants) usually works well. The procurement process is documented. The probity boxes are ticked. The evaluation framework is defensible. Everyone signs the framework agreement. Job done! The problems almost always appear later. Across jurisdictions, auditors consistently make the same observations:
• Secondary selection decisions are poorly conceived and poorly documented.
• Value for money is assumed, not managed - because suppliers are “on the panel”.
• The same few suppliers receive most of the work.
• Panels often have too many suppliers and are not designed to equitably distribute work.
• Supplier performance is rarely tracked in a meaningful way.
• Due diligence is rarely managed over the life of the panel – meaning that panel managers may even discover serious issues with a supplier identified by the press media!
• Poor performers stay on panels for years with no consequence.
• Terms and conditions get eroded via the “back door”.
• Open panels quietly expand in size while competitive tension declines.
In other words, the focus of effort is on setting up the panel and then ...well, we're all busy, aren't we?
Set and forget?
Some panels are broken because we confuse establishing a panel with managing a panel. One of the most common audit findings in the UK, NZ and Australia is depressingly simple:
Contract managers don’t manage panel supplier performance very well.
Sometimes this is blamed on resourcing. Sometimes on system limitations. The result is the same. Panels become parking lots where:
• known suppliers get work based on familiarity,
• underperforming suppliers get invited to bid based on 'being on the list',
• some suppliers on open panels don't get invited to bid at all over the multi-year life of the panel, and
• poor suppliers are invited to bid in spite of their performance because no-one documents the problem.
Audit reports repeatedly warn that a robust primary procurement that establishes a panel can be undermined by weak contract management of the panel. Panels magnify this risk because performance feedback is rarely shared across procurement staff. 'Bottom up' communication in organisations is always challenging. But recording and sharing post engagement reviews addressing a few metrics such as timeliness, quality, responsiveness and value for money is not particularly difficult. Panels do not fail because performance measurement is hard. They fail because nobody is held accountable for managing the panel.
A licence to sell?
Ask suppliers about their experience on panels and a common theme emerges. "A licence to sell' means that suppliers invest time and effort in getting onto a panel, only to be told by the panel manager that there is no work guaranteed and they have to sell to the people using the panel. Here's some other supplier gripes:
Opaque and unfair work allocation or opportunities to quote: Suppliers note that work is not distributed equitably or transparently and opportunities to quote for work are not managed across panel providers. A small number of 'known' or incumbent suppliers receive the majority of engagements, while others are rarely (or never) invited to quote. Buyers often default to familiar suppliers due to time pressure, perceived safety, bias, or sometimes even, corruption.
Lack of transparency on volumes, opportunities, and allocation rules: Many suppliers report being kept in the dark about expected panel spend or how work allocation and quotation opportunities are decided. This makes it difficult to plan resources or forecast revenue.
Significant ongoing effort with uncertain returns: Even after joining, suppliers must invest time and cost in preparing responses to secondary procurement processes – which are sometimes just as onerous and repetitive as the initial panel establishment process.
Barriers for innovative or new entrants: Newer or specialist suppliers say they struggle to win work despite panel membership because selection criteria or buyer habits favour incumbents. This perpetuates the experience trap and reduces genuine competition.
Complacency and junior resourcing: Some procurement people observe (and suppliers acknowledge) that once on a panel, certain firms “rest on their laurels” or deploy more junior staff because the work feels secure rather than competitive.
Comfort bias: the unspoken driver of panel behaviour
Panels don’t just manage supply. They manage buyer anxiety. Faced with time pressure, risk aversion and internal scrutiny, some procurement people treat panels as safety nets. The result is comfort bias.
The same supplier gets invited again because:
• they already know the organisation,
• stakeholders like them, and
• the risk feels controllable.
Panels don’t remove this behaviour. They legitimise it. Probity advisors and auditors want to see competition. Buyers want speed and familiarity.
Panels are not parking lots
Well managed panels are like ecosystems:
• suppliers come in,
• suppliers exit,
• capabilities evolve, and
• performance has consequences.
Poorly managed panels behave like car parks. Once you are in, you stay. Nothing moves.
Panels require:
• a clear panel management strategy,
• explicit secondary procurement rules,
• disciplined pricing mechanisms,
• efficient and effective performance management, and
• regular health checks.
Without these, panels drift from efficiency tools into risk avoidance mechanisms that quietly erode value.
In addition to panel management, there are many panel design issues that are not always adequately addressed.
Panel design choice #1: open or closed panels (registers)?
I once benchmarked rates on professional services panels and I found that 'closed' panels achieved significantly better outcomes that 'open' panels. Suppliers know the panel term. Buyers know who is in the tent. Pricing can sharpen because suppliers believe there is a genuine pipeline of opportunities. But closed panels also hard code a view of the market that may already be outdated by the time the first PO is issued. Markets change. Technology moves. New local or specialist players emerge. Business models evolve. Risk profiles shift.
Audit commentary repeatedly mentions the same issue: long running panels quietly lock out new capability. They reward incumbency, not relevance. Open panels are pitched as the answer to stagnation. Let suppliers join periodically. Encourage innovation. Lower barriers to entry. The problem is what happens next.
Large open panels often become so crowded that stakeholders default to familiar names. Suppliers quickly learn that panel membership does not equal opportunity. Engagement effort drops. Ghost suppliers accumulate. Open panels without structured secondary selection rules do not increase competition. An open panel without discipline does not act like a market. It acts like a directory.
Panel design choice #2: Ceiling rates
Ceiling rates regularly appear in panels as a badge of cost control. Set a maximum hourly rate. Declare “savings” when actual rates come in below it. Job done! Ceiling rates only work if:
• they are informed by real market data and have been competitively tested,
• they are subject to ongoing competition in the panel engagement process,
• they are refreshed periodically, and
• they are treated as caps, not default rates.
Too often, ceiling rates become default rates. Worse, some organisations report savings by subtracting the agreed rate from an artificially high ceiling. This creates a self fulfilling prophecy where ceiling rates drift upward over time to manufacture future “discounts”. We need to remember that value for money is achieved at the point of engagement, not at panel establishment.
So are panels broken, or are we just not managing them?
Here is the uncomfortable conclusion; panels themselves are not inherently broken as a viable procurement vehicle. They solve real problems, providing speed, standardisation, and reduced transaction cost. But the way panels are commonly designed and governed in practice creates predictable failure modes. If panels are going to remain the default procurement tool in many categories, then procurement leaders need to stop treating establishment as the finish line.
Panels only deliver value when they are actively managed and don't become static lists of suppliers. That is a leadership challenge, not a policy challenge. Panels are broken when we treat them as destinations.
They work when we treat them as systems.