The government has taken steps to give smaller businesses a greater share of work in the public sector, but sadly, the message doesn’t seem to have got through everywhere. For example, one of the defence agencies invited tenders for a large vehicle maintenance contract and specifically encouraged consortium bids from private enterprises for parts of the total. With a value of £75m, it would appear to be worth going for, but the tender document runs to five volumes, each composed of several hundred pages. Simply sparing the time to read it is more than many companies can afford, and so the chances of even submitting a bid declines towards absolute zero.
Duplication
However, the problem tends to be one of duplication rather than complexity. “The Ministry of Defence (MoD) has integrated procurement teams (IPTs), which are cross-disciplinary and each discipline has to have its input,” explains Mike Hardy, of specialist consultancy company 21ctc. This is fine, but no one seems to take responsibility for de-duplication. So an apparently huge tender document may not be as complex as it looks. But it would take a normal business a long time and a lot of resources to find that out. The government seems aware of this problem, one that’s preventing the UK’s wealth-generating businesses from getting anything like their fair share of public sector work.
“In 2007, after consulting with the Forum of Private Business (FPB) and other organisations, the Trade and Industry Select Committee published a report on public procurement, arguing that the complex and costly tendering process is hindering smaller firms’ ability to compete for work,” said FPB spokesman Phil McCabe. “It called for officials representing national and local government to be better trained and make decisions based on best value, rather than lowest price.”
But making calls is one thing, getting through the obstacles is another – and there are quite a few. Inherent conservatism is one – no one ever got fired for buying IBM. But risk avoidance itself seems to have given rise to some of the biggest disasters in the public sector.
“Big tenders fail, but big companies still win them, because they are the biggest,” says Hardy. And he knows what he’s talking about. His organisation has dealt with the MoD, NHS and government departments, as well as agencies large and small, national and local.
“Local authority procurement departments, for example, are on the whole reasonably competent at writing tenders and evaluating adherence to criteria, but they are appalling at contract management,” Hardy adds. “One London borough I know has a procurement department of 40 to 50 people, but there’s no one with contract management expertise. No one in the appropriate departments has experience, either.”
One solution
You can be reasonably confident that there’s no issue of corruption in the public bodies themselves. However, the reality that big companies tend to win bids means that there’s going to be a small pool of organisations likely to be in the running, and that leads to complacency, which can slide into a culture of corruption.
“In 2007, as part of its long inquiry into public procurement in the construction industry, the Office of Fair Trading (OFT) exposed a number of large companies, many of which have admitted to fixing the price of bids,” reveals McCabe.
Price fixing makes it very difficult for small firms to compete. But McCabe believes the solution is pretty simple. “These cartels could be foiled simply by making it easier for small businesses to tender for public contracts,” he says. “More bids mean fewer opportunities for collusion, reducing barriers to small business tenders.”
The chancellor, in his Budget speech, mentioned a target of 30% of work going to smaller companies, but, as with many things governmental, it’s not quite as simple as that.
“What is actually happening is that a review has been launched, which is going to report in the Autumn. The government appears to know what the level of work going to smaller companies is, but we expect it is embarrassingly low,” says Simon Briault of the Federation of Small Businesses (FSB). The government is trying various initiatives to raise participation, and some look to be promising. “The supply2gov website is a good initiative,” says Briault. “Smaller companies can register free and get access to lower-value contracts, including those outside their local area. We support it as a good idea, but don’t think enough people know about it and it’s not compulsory for government bodies to advertise on it, so local authorities, for example, can ignore it. And it’s not transparent enough. We don’t know what contracts have been set up, or how many businesses are getting them. But the three-month free trial period allows businesses to view opportunities throughout the UK, and that will, hopefully, get more organisations involved.”
Getting over the cost hurdle is also a priority, but the FSB is proposing a solution. “The danger is that a business owner goes for a contract, puts in a lot of time and effort, doesn’t get the contract and won’t bid again,” Briault says. “Public bodies want you to comply with certain standards – ISO, health and safety, employee diversity. We propose that, once a smaller business goes through the process once, it has a benefit even if it doesn’t win the contract. When you go again, you shouldn’t have to go through the same huge process – the initial application gets you a kind of stamp of approval.”
Shorter odds
Things are improving, albeit slowly. As well as supply2gov, the NHS procurement website and a developers’ website for smaller traders in the UK are applauded by Hardy.
“It’s a great idea, but hardly used,” he says. “The government needs to lean on all public bodies. In Scandinavia, national governments have set up pre-qualification systems. Companies simply fill-in the appropriate form and they get points for the balance sheet and all appropriate criteria. The NHS’s site is similar; a health authority can download a list of prequalified companies and they get themselves on an immediate shortlist.” So there’s advantage for the public sector in cutting workload, too.
Enterprising businesses are getting work in the public sector, so there are opportunities. Boroughs in London have ‘buy local’ policies, as does the Welsh Assembly and some other authorities in England – but there is no short cut.
“Look for tenders; write to local authorities and public agencies, advising them of the need for the services you’re offering and ask for questionnaires or other means to get on their lists,” says Hardy.
It is time-consuming, but public sector work is ongoing and payment is forthcoming, within the contract terms. As the government pursues its policy of improving access and reducing bureaucracy, tendering may well be an opportunity you’ll want to investigate.
How to fight the goliaths
1. Investigate the public sector contracts that are suitable for your size of business. Large private finance initiatives, for example, are likely to be outside the scope of any but the largest of organisations.
2. Have corporate policies in place, such as ISO accreditation, health and safety, environmental practices, employment diversity. These will show that your business has the capacity and expertise to handle the work.
3. Dedicate a senior person to the bidding process and allow sufficient time and resources for the whole process. Register at supply2gov and NHS-sid as a supplier.
4. Consider working with other, complementary businesses to build consortiums.
5. Join organisations like the FPB and FSB and make use of their resources in health and safety, employment, diversity, and environmental practices.