SMEs and public procurement

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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. Page 2 of 4
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. Page 3 of 4
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SMEs and public procurement

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