Over the past several years, government procurement has undergone the most rapid and dramatic methodological evolution of its history. Hybrid models are creating new blurred lines between the traditional definitions of open competitive procurement versus restricted selection and, on the other hand, fixed-price versus dynamic market mechanisms. By 2026, platforms such as India’s GeM, with approximately Rs. 13.6 trillion of transactions processed over the lifetime of the platform, and global procurement systems with trillions of dollars of spending processed and managed, will increasingly utilize hybrid approaches that combine multiple procurement methods within common frameworks. These sophisticated hybrid procurement models use open bidding processes to perform market discovery and restricted panels to execute the awarded bids; they use dynamic pricing mechanisms to adjust to real-time market conditions; and they employ competitive dialogue processes to allow for post-award negotiations between procuring agencies and the selected recipients that would be prohibited in classic procurement processes.
This shift from traditional procurement practices is primarily a reaction by the procurement function to the accelerating complexity of supply chains, technology, and the evolving risk landscape. The United Kingdom’s 2024 Procurement Act replaced the MEAT standard (Most Economically Advantageous Tender) with the MAT standard (Most Advantageous Tender) to reflect the recognition that value is no longer defined solely by economics. The European Union’s Dynamic Purchasing Systems that facilitate the onboarding of new suppliers on a continuous basis to fulfill the requirement for recurring procurements demonstrate the trend toward more flexible procurement frameworks. Research indicates that hybrid centralized-decentralized procurement models across the healthcare and infrastructure sectors produce the most optimal results. The findings from these studies support what procurement professionals have identified and validated experientially: there is no such thing as a single pure procurement model, and strategic hybrid combinations of procurement models outperform inflexible adherence to the traditional types of procurement models.
Understanding Hybrid Procurement: Beyond Binary Choices
Historically, public procurement was limited by binary procurement decisions, which created artificial limitations on what the procurement strategy could be. Open tenders created the most competitive environment but required the consumption of vast amounts of administrative resources for evaluating potentially hundreds of bids, including bids from many unqualified suppliers. Restricted tenders allowed for reduced evaluation but ran the risk of eliminating capable new suppliers due to lack of prior qualifications. Fixed-price contracts provided certainty but were not flexible enough to adapt to changing market conditions. Framework agreements may provide for efficiencies; however, they create lock-in situations, reducing competition over the life of the contract.
The hybrid procurement approach combines elements of traditional procurement methods to allow for strategic combinations of the various procurement methods rather than viewing each method as either an exclusive or non-exclusive approach. The central principle behind hybrid procurement is matching the procurement method to the procurement context for any procurement activity: different methods would be used for different activities (for example, different contract types may be used for different circumstances) within an established hybrid procurement framework designed to support each other while allowing for maximum flexibility and value to be achieved from public procurement.
For example, an entity that utilizes the hybrid procurement methodology may use an open tendering process to identify suppliers and pre-qualify suppliers (from an open tendering process), use a restricted tendering process to identify which supplier(s) will be awarded the framework agreement, and then use dynamic pricing arrangements (e.g., reverse auctions) for the issuing of call-off orders against the framework agreement. In this manner, the entity can take advantage of the supplier discovery benefits of open tendering, the efficiency benefits of restricted tendering, and the flexibility of dynamic pricing to achieve a result that could not have been achieved using one of the traditional procurement methods alone.
However, suppliers face two distinct but linked areas of complexity within these hybrid models. The first area is that of navigating through different phases of the procurement process, which includes distinct rules, procurement timelines, and evaluation criteria. Secondly, suppliers can find opportunities to engage at various points within a procurement lifecycle, providing value to businesses in several ways, such as demonstrating their technical innovations during qualification, price competitiveness at the auction stage, exceeding expectations with service during the execution phase, and offering value-added solutions during the contract renewal phase.
Dynamic Purchasing Systems: The Flexible Framework
Dynamic Purchasing Systems exemplify the hybrid procurement principles of blending open and competitive procurement with the efficiency of a framework (or long-term supply agreement) using continuous tech-enabled qualification as a means of ongoing supplier participation throughout the contract life (typically 4–7 years). The adoption of these systems has expanded worldwide since their introduction by the 2014 EU procurement directives, a trend likely to continue through 2026 as procurement agencies and other users realize the value of DPS to sectors experiencing continuous/recurring demand.
DPS are fundamentally electronic framework agreements; however, unlike traditional framework agreements, which limit supply eligibility to suppliers initially qualified, DPS are always open to suppliers throughout the life of the framework. As a result, competitive tension is maintained while still taking advantage of the benefits of framework agreements; buyers are able to issue mini-competitions or call off from any qualified supplier on an ongoing basis without conducting a full tender process each time.
The lifecycle of a DPS contains distinct phases that incorporate both open and restricted elements. The first phase involves issuing OJEU/TED notices soliciting applications for qualification as well as evaluating completed applications against predetermined qualifying criteria and admitting all suppliers whose applications meet minimum qualifications to become qualified suppliers on the DPS. In this phase, the application process is completely open; thus, any supplier may participate by applying for qualification, and all applicants that qualify will be admitted, regardless of whether they were initially qualified.
Ongoing admission of suppliers during the duration of the DPS allows new suppliers to apply on an ongoing basis. Buyers must evaluate new applications in accordance with established timeframes (generally 10-20 working days) and immediately admit applying suppliers who meet the criteria for DPS eligibility. Ongoing openness prevents the competitive stagnation associated with traditional frameworks, where late entrants or new innovators may wait several years for a framework to be renewed.
DPS suppliers will conduct call-off competitions, which consist of elements of the restricted tender process. When a need for specific procurement arises, buyers invite suppliers in the relevant category to participate in a mini-competition via an invitation for mini-compete. The results are commonly awarded based on criteria previously established in order to efficiently use the benefits of restricted tenders while still maintaining the competitive pressure to achieve a competitive procurement environment and encourage fresh entrants to join through DPS's ongoing admission policy.
To participate in the procurement process under a DPS, suppliers will need to build a long-term strategic commitment to taking advantage of category-specific opportunities. Suppliers who are engaged with DPS will develop long-term relationships with buyers and achieve a greater level of success through ongoing performance, competitive pricing, and responsiveness in bidding for mini-competition opportunities as compared to suppliers who may rely on one-time tenders. The initial investment made by the supplier to qualify for participation in the DPS will pay dividends throughout the supplier’s entire life cycle due to the ongoing, uninterrupted access the supplier will have to procurement opportunities without having to undergo a full tender process for each opportunity.
GeM's Hybrid Mechanisms: Combining Multiple Approaches
The Indian Government's eMarketplace has developed various hybrid systems that enable buyers to procure and purchase in a variety of ways. These include using the integrated workflow of direct purchasing, bidding, reverse auctions, and framework agreements based on their purchasing needs and individual preference.
Direct purchasing on GeM is a very simple way to buy goods from the lowest-priced qualified suppliers for orders not exceeding Rs 25,000. It works similarly to a person using an e-commerce site for consumables by using a catalogue to see the latest price of the product and to be able to buy with little or no delay. The hybrid element here is that the sellers can change the prices they offer for items at any time based on market conditions, current demand, or other sellers, enabling buyers to determine the best price for an item.
At the other end of the hybrid purchasing continuum is the auction-to-reverse auction mechanism, which represents a more sophisticated hybrid process. In this case, the buyer prepares and issues detailed technical specifications and produces an invitation to bid. Each seller must supply their qualifications based on the technical criteria and provide an initial price quote. After the seller's qualifications have been reviewed, the highest-ranked 50% of bidders, based on their initial price, will advance to a live reverse auction where they will continuously lower their prices through auction-style bidding. The resulting process integrates the technical rigor of traditional restricted tenders with the intensity of price competition found in auction sales, which maximizes quality and value.
When buyers have a clear understanding of the base price for their purchase and are knowledgeable about the product they need, they can engage in pure price competition between sellers that are already registered to do business with them. The buyer determines the reserve price, while the sellers submit lower and lower bid amounts. The seller who submitted the lowest bid (L1) will receive the contract. If during the last 15 minutes of the auction an L1 is submitted, the auction is automatically extended by 15 minutes. This process eliminates last-minute bidding and ensures the continued competitive nature of the auction until an actual market-clearing price is achieved.
Limited reverse auctions limit participation to prequalified (or invited) sellers. Limited reverse auctions incorporate restricted tender principles (where only certain sellers can be invited to bid) with dynamic pricing elements (the seller with the lowest bid price wins). Buyers may select specific sellers that they want to invite to the auction based on their past performance, technical ability, or proximity to the buyer, and then hold an auction for the selected sellers. The hybrid nature of limited reverse auctions seeks to maximize the efficiency of working with sellers that the buyer knows will be capable of performing as needed, while providing the buyer with competitive pricing through the auction process.
Multi-round bidding allows for iterative pricing adjustments by sellers, as they can revise their bids in various rounds while being able to see anonymized competitor positions but not their identities. The multi-round competitive bidding process is modelled on the competitive dialogue process in the European Union. Each round can enable buyers to update and clarify their requirements, while sellers can adjust their offers from a technical and commercial viewpoint. The competitive transparency of understanding competing bidders but not having visibility into other bidders maintains the integrity of the multi-round negotiation process and creates an environment in which price discovery is accomplished.
In order for suppliers to be successful on GeM, they need to know how to use the different types of pricing mechanisms so that they can best decide when to use which strategies. Most successful suppliers make sure to keep all competing suppliers' catalog prices competitive and establish a strong seller rating to rank L1 in direct spend categories. When suppliers enter a bid/RA sequence, they need to submit strong technical submissions in order to qualify for the auction stage of the bidding process. Suppliers also need to develop buyer relationships and demonstrate capabilities through job performance so that they can establish a track record of successful performance in order to receive an invitation to participate in a limited reverse auction.
Post-Tender Negotiations: The Competitive Dialogue Evolution
The procurement landscape will be altered in 2026 due to the introduction of hybrid procurement and its founding rule, the expanded post-tender negotiation authority (formerly prohibited), which marks a dramatic shift in procurement's traditional doctrines.
In the past, post-bid negotiations were banned due to concerns about corruption, such as allowing a buyer to selectively negotiate with a preferred bidder over other bidders (although these discussions were intended to provide clarity and assure that all bids are treated fairly). In prohibiting all post-bid negotiations, procurement's previous doctrines encouraged many inefficiencies, such as the inability of the buyer to define ambiguous aspects of the bid, the inability of the buyer to improve upon terms in the case where all bids exceeded the buyer's budget, and the inability of the buyer to later examine other technical solutions from supplier alternatives to rigid specifications.
To facilitate the procurement of complex goods and services, the competitive dialogue process within the EU provided a structured framework for conducting negotiations after submission of at least two tenders. By engaging in discussions and negotiating through several iterations with suppliers (known as "dialogue") prior to soliciting submissions or obtaining pricing information on the winning bidder's price, both buyers and suppliers can build long-term, trusted relationships. Competitive dialogue has proven useful for procuring complex products; however, the structured nature and high resource costs of competitive dialogue processes would severely limit their usefulness for smaller value contracts.
The evolution of the 2026 post-tender negotiation process can be viewed as an application of the Competitive Dialogue principles but much more broadly as they become part of the regular buying process. The UK Procurement Act allows public sector organizations to negotiate with one or more bidders after they have submitted their bids on the condition that the buyers are transparent in their negotiations, that they give the same opportunity to all bidders that meet the criteria to submit a bid, and that they keep a record of the negotiations so that the procurement can be audited. The buyers have controlled flexibility by being allowed to optimize the value received from a supplier while simultaneously ensuring integrity through a fair and transparent process.
Negotiation opportunities for suppliers have created additional strategic considerations within their tender responses to the procurement organization. Suppliers must evaluate their bids based on the best technical value with an additional consideration to make it an attractive commercial proposal to the procurement organization. Suppliers also need to understand that there are opportunities available to refine their commercial offers during the negotiation phase with the buyers. Suppliers that submit strong technical offers that demonstrate their creativity and the degree to which they understand the buyers’ needs can use this to gain negotiating leverage with the buyers. In particular, suppliers that demonstrate superior solutions to meeting the buyers’ needs recognize that the buyers will invest time with these suppliers to negotiate potential price revisions, even when the suppliers do not submit the lowest initial bid. Conversely, suppliers that do not provide enough technical differentiation to be able to negotiate on merit will be less likely to be engaged by buyers.
Thus, suppliers should prepare themselves for the post-tender negotiation by developing flexible positioning strategies—understanding their lowest reasonable price point to suppliers, identifying the variables that can be modified (i.e., delivery time, payment terms, warranty period, service levels), preparing technical solutions based on different combinations of value and cost, and training their negotiation team using collaborative problem-solving techniques that improve the buyers’ confidence, whilst protecting the margins of the supplier.
The Centralized-Decentralized Hybrid in Practice
A growing number of hybrid forms exist in procurement that combine both centralized and decentralized procurement models within coherent coordination and local responsiveness systems. Research conducted in the areas of healthcare and infrastructure supports the finding that neither purely central nor purely decentralized procurement systems deliver optimal performance; rather, hybrid systems that thoughtfully utilize both types of models tend to yield superior results.
Purely centralized procurement systems are defined as having one single central authority that is charged with managing all aspects of the procurement function, which yields economies of scale and standardization benefits and concentrations of professional procurement expertise. Furthermore, the advent of centrally managed procurement systems creates challenges for local responsiveness, as the members of central teams do not have adequate contextual understanding of local conditions in order to facilitate timely and effective procurement decisions or to limit local-level quirks in the decision-making process by restricting all levels of procurement decision-making to established central processes or the absence of the ability to utilize superior alternatives due to standardization restricting conceptually based experimentation by local entities.
Purely decentralized procurement systems are defined as independent entities responsible for managing their own purchasing activities, resulting in greater responsiveness to local conditions, increased flexibility in terms of local innovations, as well as direct accountability for their procurement decisions. Nevertheless, the use of purely decentralized procurement systems creates fragmentation in purchasing power, decreased realization of economies of scale, duplication in procurement capability development across organizations, and challenges associated with procuring similar types of goods and services differently at the local and/or entity levels.
The hybrid approach to strategic procurement allocates categories strategically by centralizing those where scale and standardization are important for companies and decentralizing those that provide the greatest value based on local conditions and flexibility. For example, procurement of IT hardware can be done by creating a central procurement scheme through which framework agreements can leverage the volume discount and standardized configurations, while maintenance for local facilities can be procured by the local site with no regard for how a central procurement approach might work.
Framework agreements are created centrally and enable local entities to have call-off authorization against the framework. Central procurement teams negotiate framework contracts over multiple years with qualified suppliers and establish pre-agreed terms, pricing, and quality standards. Each local entity issues call-offs as necessary against the centrally negotiated term contracts, allowing the local entities to maintain their independent procurement authority while obtaining the benefits of having had centralized negotiation power for those terms.
Dynamic purchasing systems allow the flexibility of the hybrid model to be reflected in how both central and local authorities manage the system. Central authorities create the DP's framework and qualify suppliers to participate in it by establishing the outline of the mini-competition processes, and each local entity may freely participate in the mini-competition for the items they require for their business. By design, the DPS model provides consistency in the way that suppliers are qualified and mini-competitions are conducted while allowing local entities to make purchasing decisions based on their own requirements and preferences in a decentralized fashion.
Hybrid-centralized decentralized systems require multi-layer-level relationship strategies for suppliers and for buying organizations. Building relationships with the Central Authority will secure inclusion in each of the Framework Agreements and favorable baseline terms. Simultaneously, building a relationship with the Local Purchasing Manager(s) that performs the call-offs will ensure your solutions will be selected when the local Running Entity issues requirements. Success will require the supplier's ability to understand the criteria used by central decision markets as well as local operating conditions.
AI-Driven Dynamic Pricing: Real-Time Market Responsiveness
Artificial Intelligence (AI) and real-time data analytics (RDA) are making dynamic pricing possible in the field of government procurement by 2026 in a very sophisticated manner that was previously unavailable. Historically, government contracts used to have a fixed price for a period of time (months/years), and as market prices fluctuated (up or down/non-sustainable), this often resulted in windfalls to certain contractors when prices decreased or significant supply chain disruptions when fixed-price contracts became non-sustainable.
AI-enabled dynamic pricing allows procurements to adjust prices based on market conditions and still maintain integrity in the contract by being able to adjust prices in a transparent manner, following rules that have been pre-defined as part of the contract. Pricing equations are included in these contracts that, once established, will allow for automatic adjustments of contract prices based on pre-selected indices (for example, commodity prices, exchange rates, labor cost indexes, and fuel prices). These indices will be monitored constantly by the AI and therefore will be able to adjust contract prices without requiring manual intervention or contract renegotiation.
Commodity Indexed Pricing works particularly well in categories where the input costs are priced in a volatile market. Many construction contracts are now being written with formulations that will allow for automatic adjustments of contract prices based on the steel, cement, and fuel prices based on the indexes published by governmental statistical agencies. If the prices for any of these commodities move beyond predetermined intervals (5% +/- from baseline), the prices being paid under the contract will be automatically adjusted using the transparent formulas that both parties agreed to at the inception of the contract; in the case of increased input costs, the suppliers are protected from unsustainable losses as a result of price increases, and, conversely, if the input costs decrease, the buyer will capture these savings.
Using currency-indexed pricing on equipment imports with lengthy delivery times limits both parties' risk of fluctuations in exchange rates. Contracts that are written in a foreign currency but are paid in an equivalent value of the local currency allow for automatic adjustment to the current translation of the currency via the official exchange rate between the two currencies on predetermined calendar dates—therefore, neither party assumes 100% of the exchange risk. This allows for the ability to purchase goods from abroad without the concerns of it impacting the ability to buy them through currency speculation.
In the case of long-term service contracts, the increase in labor cost through requiring wage increases to be automatically passed through is maintained through indexation to the various wage increases as identified by either the minimum wage law or through industry-specific wage indices within multi-year facility management or security services contracts. This will continue to occur even when labor markets experience constriction and prevent suppliers' current labor contracts from being sustainable.
To ensure that suppliers have dynamic pricing mechanisms that will provide suppliers with the ability to model their costs and utilize them to identify which of the numerous factors impact their cost as well as developing contract structures protective against negatively impacting events but sharing the benefit of any positive events to the supplier and would cause the buyer to view the supplier as a financially stable party, suppliers should propose the appropriate indices, methods of adjustment, and thresholds that correspond to each suppliers' unique drivers of cost to demonstrate to the buyers their understanding of their cost structure as well as to enhance the buyers' confidence in the supplier when there is an absence of proper identification of the dynamics pricing by supplier resulting from the supplier's understanding of their cost structure.
Practical Implementation: What Suppliers Must Do Now
Navigating hybrid procurement models will require suppliers to evolve to develop competence and strategies far superior to that needed for success in traditional binary tender types.
Firstly, invest the time to fully comprehend the specific hybrid mechanism or mechanisms the platforms you are targeting use. Understand the bidding guidelines of GeM, study the EU Dynamic Purchasing System procedures, and analyze the way major buyers in your categories customarily use procurement methods in various combinations. Having a broad range of knowledge of the procurement process itself is not good enough; you need to possess a fluency with the platforms you use and how buyers operationalize the various hybrid approaches.
Secondly, you need to develop your organization's capability to manage the complexities of engaging in multi-stage procurement processes. There will be different qualification phases , technical evaluations, dynamic price bidding, negotiation, and call-offs under various frameworks, and each will require its own specific skills and types of documentation. You need to ensure your staff has specialists or training on each phase of the procurement process, as opposed to excelling in one specific area while being unprepared and unable to function in the other areas of engagement.
Thirdly, create pricing strategies that include not just fixed price quotes but also some elements that are dynamic (change over time). Have a clear understanding of your cost drivers so that you can develop intelligent indexing formulas and margin requirements that allow you to propose sustainable multi-year pricing strategies—while also keeping current with your competition relative to changes in the marketplace, not just against fixed records at your competitors. Basic cost-plus-margin pricing alone is inadequate for more advanced dynamic pricing strategies.
Fourthly, you need to be prepared for continuous engagement rather than just responding to tenders as they arise. Responding to mini-competitions via Dynamic Purchasing Systems (DPSs), establishing framework contracts with ongoing opportunities to compete for work against the same customer, and engaging with suppliers through performance-based qualification processes will provide suppliers with the necessary skills to identify potential work regularly, respond quickly, and continue to engage through long-term framework contracts. Suppliers who only respond once will not have a chance of winning in the hybrid environment because their ability to engage continuously will be critical to their success.
Finally, you need to have the technology in place to support participation in a hybrid procurement model. Automated bidding systems capable of monitoring bids across multiple platforms and participating in mini-competitions; dynamic pricing tools that can respond to an auction process in "real-time"; contract management systems to manage the complexities of contracts arising from framework agreements and call-off processes; and a set of analytics tools to monitor your competitive position throughout various phases of the procurement cycle are all considered essential infrastructure, not simply optional enhancements.
The Bottom Line: Hybrid Flexibility as Competitive Necessity
By 2026, hybrid ways of getting goods and services (e.g., many methods, authorities, and price mechanisms) are expected to have moved from being experimental to the norm in government purchasing processes around the world. Key drivers show that future procurement processes will be less about how the procurement process is carried out (e.g., principle-based methodologies) and more about having the strategic flexibility to respond to the various procurement methods available. These include: The "flexible negotiation" provisions in the UK's Procurement Act, the growth of the EU's Dynamic Procurement System (DPS), sophisticated bid-to-reverse auction (RA) methods being utilized in the Government e-Marketplace (GeM), and the impact of AI-based dynamic pricing on future procurement strategies.
Succeeding in this hybrid procurement environment requires suppliers to go beyond mastering a single type of tender to understanding how to navigate multi-method frameworks. Suppliers who only know how to respond to traditional open-tender processes will find themselves lacking capacity when they must compete with bid-to-reverse auction dynamics. As such, suppliers who perform competitively on price in an auction may not have the technical ability or expertise to compete in frameworks that emphasize innovation and quality. Similarly, suppliers who are used to certainty regarding fixed pricing will struggle to compete under dynamic pricing strategies that reward using complex pricing models and quick responses to changes in the marketplace.
Therefore, suppliers must prioritize organizational capability development, pricing sophistication, relationship strategies, and technology infrastructure to enable them to successfully participate across all hybrid model elements that buyers have implemented in their categories. To accomplish this, suppliers must invest in developing their organizational capabilities, staff training, implementing systems/support tools, and building a focus on developing organizational strategic thinking that goes well beyond preparing for any single tender.
The development of hybrid procurement is a breakthrough for suppliers that embrace and manage complexity, develop advanced capabilities, and take a strategic approach to government business rather than transactional methods. Early adopters will secure opportunities, while their counterparts trying to gain traction with traditional methods will continue to struggle. Late adopters will miss out on opportunities as procurement frameworks continue to evolve and require hybrid-ready suppliers.
Begin to develop hybrid procurement capability today to secure tomorrow's tenders through strategic investments in your understanding and preparation for the flexible, dynamic, multi-method procurement frameworks that will define government contracting in 2026 and beyond.
