SMEs and public procurement

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