SMEs and public procurement
SMEs and public procurement
SMEs and public procurement
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<strong>SMEs</strong> <strong>and</strong> <strong>public</strong><br />
<strong>procurement</strong><br />
Recent developments<br />
February 2011<br />
The Association is Registered as a company in Engl<strong>and</strong> with the number 132142, it is limited by guarantee <strong>and</strong> has its registered office at the above address
Recent changes to <strong>public</strong> <strong>procurement</strong><br />
guidelines<br />
The Cabinet Office has announced a package of measures <strong>and</strong> recommendations<br />
aimed at improving access to <strong>procurement</strong> opportunities by <strong>SMEs</strong>.<br />
The government has recognised concerns raised by ACE <strong>and</strong> other bodies regarding<br />
the difficulties that many <strong>SMEs</strong> face in <strong>public</strong> sector <strong>procurement</strong> processes. The<br />
administrative burden <strong>and</strong> cost of <strong>procurement</strong>, inadequate information, repetitive<br />
prequalification processes <strong>and</strong> myriad terms <strong>and</strong> conditions have been highlighted<br />
by ACE members as particular issues.<br />
Summary of proposals<br />
Easier access to opportunities<br />
A new Contracts Finder system has been introduced, to replace the existing<br />
Supply2.gov.uk service. Contracts Finder, run by Business Link, will be a st<strong>and</strong>ard<br />
point of <strong>public</strong>ation for <strong>procurement</strong> <strong>and</strong> contracting information. Access to<br />
Contracts Finder is currently free of charge, compared with the subscription fees<br />
associated with Supply2.<br />
Formal targets<br />
From March 2011, all central government departments will be required to publish a<br />
set of specific, targeted actions to increase their business with <strong>SMEs</strong>.<br />
Larger projects will also be split up into “micro lots” where appropriate.<br />
Reducing over-specification<br />
Departments will be required to adopt a greater use of outcome-based specifications,<br />
<strong>and</strong> avoid over-specifying projects. Major projects will be assessed by the Major<br />
Projects Authority in the Cabinet Office.<br />
Prequalification reforms<br />
ACE members often note that prequalification processes can be administratively<br />
burdensome, unnecessarily repetitive, <strong>and</strong> a drain on resources. Furthermore, a<br />
greater shift away from framework <strong>procurement</strong> toward discrete packages of work<br />
may trigger more competitions – <strong>and</strong> more prequalification.<br />
Therefore, the government has proposed to eliminate PQQs entirely for all central<br />
government <strong>procurement</strong>s below £100,000, thereby allowing procurers free choice<br />
over the best route to market.<br />
Larger <strong>procurement</strong>s will see greater use of the “open procedure”, which would<br />
eliminate a separate selection stage early in the process.<br />
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For all <strong>procurement</strong>s in common commodities, systems will allow suppliers to<br />
provide their prequalification data once, avoiding the need for multiple<br />
prequalification.<br />
Building capacity in <strong>public</strong> sector <strong>procurement</strong><br />
Key to improving efficiency in <strong>procurement</strong> is to develop the skills of <strong>public</strong> sector<br />
<strong>procurement</strong> teams. This is particularly true for the <strong>procurement</strong> of professional<br />
services, where project requirements are often non-trivial.<br />
To improve skill levels <strong>and</strong> promote an exchange of ideas, the Cabinet Office has<br />
proposed to set up an interchange programme to bring business secondees into<br />
<strong>public</strong> <strong>procurement</strong> teams <strong>and</strong> send civil servants into the business world.<br />
Innovation <strong>and</strong> feedback<br />
To help ensure that the views of businesses are taken on board, an extended<br />
Supplier Feedback Service will be launched. A “mystery shopper” process will<br />
challenge procurers to be more transparent <strong>and</strong> open, <strong>and</strong> a new SME Panel will be<br />
established to hold the government to account on delivery.<br />
A new Crown Commercial Representative will be introduced to build strategic<br />
dialogue between clients <strong>and</strong> suppliers.<br />
There will also be a series of SME product surgeries, which will allow <strong>SMEs</strong> to pitch<br />
innovative products <strong>and</strong> services to a panel of senior <strong>procurement</strong> <strong>and</strong> operational<br />
professionals.<br />
Analysis<br />
This has the potential to be a significant set of reforms. It is certainly specifically<br />
targeted at increasing access of <strong>SMEs</strong> to <strong>public</strong> sector <strong>procurement</strong> opportunities.<br />
It is particularly encouraging that the government appears to have accepted the<br />
views of businesses on the need for reforms to prequalification processes. Reducing<br />
the administrative <strong>and</strong> financial burden of <strong>procurement</strong> to both suppliers <strong>and</strong> clients<br />
can help to generate significant efficiency savings.<br />
However, free choice for purchasers to select their routes to market also increases<br />
the risk of a lack of transparency in the process of appointment. This could open<br />
purchasers to legal challenge if not h<strong>and</strong>led correctly.<br />
Encouraging consistency of approach across all sectors of government has<br />
traditionally been a challenge. The somewhat autonomous nature of government<br />
departments <strong>and</strong> agencies in the <strong>procurement</strong> process has led to a wide variety of<br />
practices <strong>and</strong> philosophies, particularly in the local government arena. It is pleasing<br />
that Baroness Eaton, chair of the Local Government Group, has endorsed the<br />
measures proposed. However, the culture change required to implement the<br />
measures fully will probably be a longer-term project.<br />
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The proposed move towards greater use of outcome-based specification presents<br />
real opportunities to change <strong>public</strong> bodies’ approaches to project management.<br />
Outcome-based specification discourages the use of risk-averse approaches, <strong>and</strong><br />
actively calls for a partnership-driven approach to ensure that <strong>public</strong> bodies get what<br />
they need at a reasonable price. Again, this may require significant culture shifts<br />
within the <strong>public</strong> sector, which will be challenging to implement.<br />
It is also important to recognise that good <strong>procurement</strong> practice does currently exist<br />
in parts of the <strong>public</strong> sector. It would be churlish to be overly-critical <strong>and</strong> ignore the<br />
successful aspects that already exist.<br />
Specific measures to encourage or require <strong>public</strong> authorities to learn from each other<br />
could also generate benefits. There is a pool of expertise already in the <strong>public</strong> sector<br />
that could be drawn on more effectively.<br />
The sharing of expertise between <strong>public</strong> bodies also presents opportunities for cost<br />
savings in the <strong>public</strong> sector. If <strong>public</strong> bodies were to pool their resources in specialist<br />
areas of <strong>procurement</strong> (e.g. construction), then multiple authorities could benefit from<br />
experienced <strong>and</strong> capable professionals while simultaneously reducing the overall<br />
cost of <strong>procurement</strong>.<br />
ACE will continue to promote members’ views on the <strong>public</strong> sector <strong>procurement</strong><br />
process as these proposals are implemented.<br />
For more information <strong>and</strong> to share your views, please contact Michael Hall, ACE’s<br />
head of policy <strong>and</strong> external affairs (mhall@acenet.co.uk).<br />
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