Does Size Matter? SMEs in Public Sector Procurement

The public sector is a potentially lucrative source of business, as the UK spends about £222 billion a year on procurement.  There are also certain advantages to working with public sector organisations; they are required by EU law to be transparent and fair in the way they choose suppliers, they are very stable and reputable, and usually make prompt payments.

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Which OJEU contracts should I bid for?

Let’s start with this essential piece of advice:

Do not make the mistake of going after every tender!

It can be appealing to start off on this footing when you see a flood of tender notices coming through, all of which apparently match your business area. But are you remembering how high bidding costs can be and have you really thought about your chances of winning? Companies who bid for everything are not normally the most successful. Bidding on the wrong contract can be a waste of resources if you have no chance of winning so you need to think about things a bit more strategically and start targeting specific opportunities to make the most of your time and resources. Don’t just enter to make up the numbers.

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Official Journal of the European Union (OJEU)

Philippe Lebaube

The Official Journal of the European Union(OJEU) is the gazette of record for the European Union. It has been published in 22 official languages (23 when Irish is required) of the member states, every working day since the Treaty of Nice entered into force on 1 February 2003.  The OJEU superseded the earlier Official Journal of the European Community (OJEC) with the establishment of the European Union.

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Swedish Court Cancels Armoured Vehicle Contract

The European defence market is changing. Where once each nation maintained its own defence industry, this is no longer a viable model as Europe faces enormous pressure from the US, which has the worlds largest defence market. In August this year, a new European Directive (2009/81/EC) on defence and security procurement came into force. The new Directive brings defence procurement more into line with mainstream public procurement. Previously member states were able to avoid openly tendering for even quite mundane items of equipment by invoking Article 296 of the European Treaty and stating that they were for their ‘essential security interests.’

Earlier today the Stockholm County Administrative Court ruled that a €240 million armoured personnel carrier deal with the Finnish arms manufacturer, Patria, had breached Swedish public procurement law. The Swedish Defense Materiel Administration (FMV) has been ordered to repeat the tender process despite awarding the contract to Patria in June.
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Public sector tendering – lost in translation..?

Have you ever come across a tender that looks interesting but you just don’t have a clue what it’s talking about?

Buyers, often with the best intentions, sometimes include terminology that is quite frankly harder to understand than ‘The Theory of Everything’ by Stephen Hawkings. If you’re new to public sector tendering, here’s a simple jargon buster of some of the most commonly used terms that may just save your PC from being thrown out the window…!

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If at first you don’t succeed…

With its wildly different culture, risk adversity, rigid processes and sometimes outright incompetence, is it any wonder that so many suppliers are put off working with the public sector?  Probably not.

So, you should just forget it right? Getting into the public sector market will involve hard work and perseverance.  You will have to spend a bit of time understanding the public sector procurement processes and pick up some new skills.  You will more than likely face frustrations along the way, you might even have to change some of your preconceptions about this elusive market.  Sometimes it’ll seem like it’s just not worth the hassle so you don’t bother pursuing it.

But could it be worth a second look? Is it worth getting your company geared up to do business with the public sector? If you supply a product or service that the public sector demands then here are a few things to inform your decision:

– The UK public procurement market is worth over £175 billion a year;
– Public sector organisations are not going to go out of business any time soon, this means a level of security and certainty that you won’t get with a lot of private sector organisations;
– Public sector clients tend to make prompt payments;
– There’s a high chance of repeat contracts;
– Processes are (largely) open, transparent and fair.

Now, if you’ve had a negative experience with a public sector buying organisation, you might well disagree with this last point.  However, the first thing you need to remember is that no two public sector purchasers are the same.  This can be a difficult thing to get a handle on to start with. On opposite sides of the spectrum you could have one organisation keen on innovation, communication and strategic partnerships and another still firmly operating in the master and servant mindset.  It is up to you to do some digging, find out what’s what, then decide which organisations you want to work with.  Tricky, but worth it perhaps?

You snooze, you lose!

If you have ever attempted to read the public procurement directives then you will know there are a number of regulations governing the advertising and award of public sector contracts. 

Contracts that fall below the EC procurement thresholds are not subject to these directives.  Below threshold contracts are subject to the rules and principles of the EC Treaty (including non-discrimination, equal treatment, transparency etc), and European Court of Justice case-law has indicated these contracts should be ‘sufficiently’ advertised.  However, aside from these rather ambiguous guidelines, there are no real rules regulating these contracts. 

OJEU tenders are required to follow specific regulations on timescales to allow suppliers adequate time to respond to tenders, not usually less than 22 days.  Below threshold tenders, however, often have much tighter deadlines.  To make this situation worse, below threshold contracts are found in literally hundreds of places, including websites, local and national newspapers, and trade journals, meaning that they cannot always be identified as soon as they are advertised.

It is therefore particularly important to respond to these contracts as soon as possible.  In fact, regardless of whether it is a below threshold or OJEU tender, it is advisable to make initial contact with the awarding authority as early as possible.  This can only increase the time you have to prepare your bid or Pre-Qualification Questionnaire.  It also means that the authority should keep you informed of any changes or further information relating to the tender.  Responding to the tender notice does not bind you to bidding for the contract, but if you miss the deadline, then you have missed your opportunity.  As the old saying goes “you snooze, you lose!”

European Commission investigates Glasgow Housing Association’s failure to openly tender

Glasgow Housing Association (GHA) is a private not-for-profit company created by the Scottish Government for the purpose of owning and managing Glasgow’s social housing stock. The housing stock, of approximately 81,000 houses and flats, was previously owned by the Glasgow City Council.

Following a poll of the Council’s tenants, the vast majority of their social housing was transferred to the ownership of the Glasgow Housing Association. The transfer was mired in controversy at the time, there was a strong No campaign backed by the Scottish Trades Union Congress (STUC) and many commentators doubted that there was a genuine desire on the part of the tenants to transfer to another landlord. However, a condition of having Glasgow’s housing debt written off was a transfer whole stock. This was initially going to be to one landlord, however, the Scottish Government intervened and introduced the concept of Second Stage Transfer (SST) to smaller Housing Associations over time.

Taroub Zahran, the Chief Executive of Glasgow Housing Association, resigned from her position at the end of Taroub Zahran Former Chief Executive - Glasgow Housing AssociationSeptember after what was believed to have been disagreements with the Scottish Government and Glasgow City Council over the slow speed of stock transfer.

A total of 322 tenants in Glasgow transferred to a new landlord at the end of July following the transfer of homes from Glasgow Housing Association (GHA) to two community-based housing associations under the Second Stage Transfer process.

Provanhall Housing Association took control of 195 homes, and another 127 houses in Hyndland were transferred to Glasgow West Housing Association.

Provanhall and Glasgow West join Shettleston, Ardenglen, Cassiltoun and Parkhead housing associations which took ownership of GHA homes in March this year.

A further 21 Local Housing Organisations who currently manage approximately 19,000 houses on behalf of GHA are still progressing through the various stages of the SST process. Ballots for a further four potential transfers are planned for this calendar year, with transfer potentially by the end of the financial year.

The European Commission, who will have begun their investigation following a complaint, has asked the UK Government to provide further information on how these contracts were awarded as it believes that they were public service contracts and as such should have been awarded on the basis of an open and transparent tendering process. If the European Commission is correct that no open tendering process was conducted, the UK will have failed to fulfill its obligations under the Public Procurement Directive 2004/18/EC.

The penalty for failing to fulfill such obligations is often simply that the relevant member state has to demonstrate that it has taken measures to rectify the situation and to prevent a future re-occurrence. Although sometimes, if it is not satisfied with the action that has been taken, the Commission will ask the European Court of Justice to impose a financial penalty.

In 2004 the Commission sought to impose daily fines against Germany for two long term (30 years) waste contracts that had not been correctly tendered.The fines sought were €31,680 per day for the City of Bockhorn contract and €126,720 per day for the City of Brunswick contract, which would be payable until the illegal contracts had been cancelled. That’s €58 million per year for 30 years!

The German government were in a bit of a sticky situation here, as it was the City authorities that had entered into the contracts and so the Government had no direct authority. Fortunately they managed to negotiate an agreement annulling the contracts.

Tories will ‘unleash an army of armchair auditors’ to spend money better

Francis Maude - Shadow Minister for the Cabinet Office

Francis Maude - Shadow Minister for the Cabinet Office

Speaking at the Conservative party conference in Manchester yesterday, Francis Maude, Shadow Minister for the Cabinet Office, said the party would publish online, every item of government expenditure over £25,000 and all government tender documents for contracts worth over £10,000.

The Shadow Minister said that he thought that this would allow ‘an army of armchair auditors’ to crawl all over the governments accounts and not only help them to spend money better, but it would also help to rebuild trust.

This isn’t the first time that politicians have promised to make government procurement more transparent:

  • In 2003 the Better Regulation Task Force published ‘Government Supporter and Customer?’ Recomendation No. 1 was that the government should advertise ‘lower value contracts from across central government and include information on future contract opportunities.’ This set the scene for the Supply2.gov website, which due to a woeful lack of support from the Department of Business failed to reach its true potential and is due to be replaced by a new website implementing the Glover recommendations (see below).
  • In 2005 the Office of Government Commerce and the Small Business Service published ‘Smaller supplier…..better value?‘ which pointed out the challenges facing SME’s and how the government could help by publishing their future contracts online.
  • Also in 2005 the Office of the Deputy Prime Minister (when John Prescott was still a force to be reckoned with) published the ‘Small Business Friendly Concordat: Good Practice Guidance’ which yet again urged public sector organisations to use their websites to publish ‘details of forthcoming bidding opportunities.’
  • In 2006 the then Scottish Executive published a ‘Review of Public Procurement in Scotland’ authored by John McClelland, which recommended that ‘a single public sector “electronic portal” should be established. Suppliers must be able to access all essential information on opportunities to offer services and bid for contracts for the supply of commodities and services to the whole Public Sector in Scotland.’ This report resulted in the establishment of the rather effective Public Contracts Scotland website in 2008, which is run by the (some say, brilliant) team behind Tenders Direct.
  • Most recently in November 2008, the Glover report or ‘Accelerating the SME economic engine: through transparent, simple and strategic procurement,’ as it was more formally known, yet again, you guessed it, recommended that:
    • ‘By 2010, contract opportunities above £20,000 across the whole public sector should be advertised electronically with standard indicative contract value ranges, and accessible through a single, free, easy to search online portal.’

So at numerous times over the last six years, various politicians, government departments, quango’s and notable report authors have called for more transparency in the publication of government contracts.

The main barrier to progress has definitely been the lack of a clear lead by central government, either to publish its own contracts, or to establish an infrastructure and clear guidelines or regulations to ensure that other public bodies publish their contracts. The secondary barrier has been an unwillingness by staff in local authorities, NHS trusts, etc., to publish their contracts. This unwilling attitude stems from a variety of reasons such as a fear that they will be inundated with suppliers, that they want to keep contracts for local suppliers, that they ‘know’ who the best suppliers are anyway. Provided the procurement activity is approached professionally these fears are either groundless, well intentioned, but illegal and ineffective, or simply wrong. All of them get in the way of efficient procurement, or as the Right Honorable Member for Horsham put it yesterday we need to ‘spend money better.’

 The Department for Business and the Office of Government Commerce have been making some progress towards implementing the recommendations contained in the Glover Report. Unfortunately progress appears to have slowed as the General Election looms closer. At least it seems that the Tories have a similar, if not even greater, enthusiasm to open up public procurement, so that regardless of who wins power next year we should have a new era of open access to government contracts.

CPV Codes – In principle brilliant, in practice, hopeless.

Common Procurement Vocabulary (CPV) codes were implemented in 1993 as a standard classification system for public tenders across Europe. The codes are eight digits long and each one has a corresponding description, intended to cover a broad range of supplies, services, and works. However, it’s guaranteed that the one code you need, you’ll never find.

There are plenty of very useful codes in the system, and there are plenty weird and wonderful codes as well. Some personal favourites include:
39293500-7         Imitation jewellery.
35410000-1         Horse or hand-drawn carts and other non-mechanically-propelled vehicles.
33000000-0         Medical and laboratory devices, optical and precision devices, watches and clocks, pharmaceuticals and related medical consumables.
03141000-1         Bulls’ semen.
18320000-8         Brassieres, corsets, suspenders and similar articles.

I mean this classification system was written for the Public Sector right? So why any Awarding authority would be putting together a tender for not just any jewellery, but imitation jewellery I am unsure. Horse or hand drawn carts, plenty of those out on the streets. The medical CPV code has always made me chuckle- where do watches and clocks fit in to that one? To be fair they did revise that one in 2008.  Now let’s take Bulls’ Semen- do I even want to know? Lastly, all those naughty undergarments being tendered in the public sector, tut tut tut. 

So there are plenty of nonsensical CPV codes as we can see, but what about those ones you really need and cannot seem to find? It wasn’t until 2008 that there was an adequate CPV code for Web Design Services. What did purchasers select instead? Computer related services? Perhaps a bit broad.

When the CPV codes were revised in 2008 many important codes were cut, very specific codes were stripped back and the structure of the supplementary vocabulary was changed to take account of this.  For example, there were 43 different CPV codes for printing and now there is just one.  The idea is that you select the main CPV code for say “Printing” and then add the appropriate supplementary code for “books”, “magazines” or whatever.  Again you can kind of see where they were going with this but in practice, it’s hopeless! No one uses these supplementary codes, which is bad for suppliers trying to locate the right tender notices because the title and CPV codes are even more vague than before the change.

CPV codes were intended to boost transparency in public procurement and make it easier for suppliers to identify business opportunities. In my opinion, all CPV codes have done is cloud over what purchasers are really looking for and flood suppliers with irrelevant notices.

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