Working with customers in Ireland through our Tenders Direct Ireland service we have traditionally heard anecdotal tales of poor procurement practices. Worrying issues such as cartels controlling certain sectors, bid price rigging and corrupt evaluation processes have all been highlighted not just by our customers but through news sources in Ireland. The net impact of this on the spend of buying authorities in Ireland is catastrophic: an estimate that procurement exercises, subject to supplier bid rigging, can cost the buying authority an additional 20–30% on the contract value (Irish Independent 2016). On an approximate €8.5bn annual spend by the public sector in Ireland that soon adds up multi million euro losses.
The ripple effect is obviously that potential suppliers quickly become disenchanted with the idea of bidding. Why invest time, money and resources into applying for public contracts you have no chance of winning? This in turn causes the stagnation of the market and the buying authorities are no longer able to assure the public they are getting value for money in their procurement exercises.
In 2014, The Department of Public Expenditure and Reform claimed that only 14% of SMEs in Ireland had tendered for public sector work yet the Office of Government Procurement claimed that 66% of public procurement spend was with SMEs. That would suggest that the reward could potentially be high for SME providers willing to take part in the procurement process.
So, what is being done to encourage more suppliers, particularly SMEs to take part?
On May 5th 2016 the Irish government transposed the 2014 European Directive into law and this is now active relating to all procurements deemed to be in operation from 18th April 2016. The new regulations have largely been transposed in line with the UK transposition. Suppliers are now able to submit a European Single Procurement Document (ESPD) and the burden of proof has been lifted. This means that suppliers will no longer have to provide lengthy PQQ submissions with a myriad of supporting documentation – cutting down the time required and increasing the likelihood of SMEs getting involved.
Whilst this is a huge step forward, it is not enough to overcome some of the more embedded issues in Irish procurement such as bid rigging and cartel control.
We contacted the Office for Government Procurement (OGP) which was set up in 2014 to lead on the Public Procurement Reform Programme in Ireland for comment. They informed us that they have taken responsibility for centralising a vast amount of public spending in Ireland and managing a series of frameworks to further streamline procurement practices.
They were able to provide us with plenty of ‘good news’ stories as far as SMEs participation goes, for example, 72% of the €14.5m spend on the Framework Agreement for ICT Computer and Storage Infrastructure was with SMEs. The procedural changes without a doubt make the process easier for SMEs, but what is being done to address the cultural barriers of corruption and fraud? Who are the SMEs winning this business? If it remains to be the cartels, then the initial issues still stand.
One measure put in place is the Tender Advisory Service (TAS) which was set up on a pilot basis in 2015. The service enables bidders to escalate issues of concern during a competitive process after they have used any clarification processes set out in the tender documentation, and must be actioned six days before the closing date for receipt of tenders. Suppliers can email a standard enquiry form to the TAS who will then work with the buying authority to assess the facts of the case and, where appropriate, make recommendations to the buying authority regarding the process.
This is another good step forward as it works to resolve issues within three days, i.e. prior to the evaluation process rather than after. The only flaw in this process is that the supplier’s information will be known to the buyer – not kept anonymous as it is with the Crown Commercial Service’s Mystery Shopper system in the UK. Supplier’s are always wary of raising challenges due to the impact it may have on future business opportunities, so how likely they would be to use this service when they have to disclose their information is questionable? It will be interesting to see the results of the TAS pilot and if it is going to be extended.
So, as with other countries, the process itself is becoming more accessible and the OGP are doing a great job of implementing the changes. But will it be enough to change the culture of procurement in Ireland and eradicate the pockets of poor practice? Hopefully yes. But I can’t help but feel a more robust whistle blowing system, which is entirely anonymous for the reporting party, will support this work further. Until supplier’s and buyer’s feel they can report concerns without fear of retribution, then its unlikely major change will occur but as the market opens to SMEs we may see slow, steady improvements.