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?
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!”
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.
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.
John Denham, the Communities Secretary who is responsible for local government, yesterday held a meeting with innovation and procurement experts from the private sector, academia and the public sector.
Mr. Denham started the meeting by saying that “Councils have proved they can be efficient….” well I think that’s news to most taxpayers, who would like to see a considerable improvement in the efficiency of their local authority. He went on to say that “given the economic climate their £42 billion buying power must be made to work harder,” in contrast to the earlier hollow praise I think that’s something we can all agree on.
Mr Denham set out three new approaches that his officials belive that councils should consider:
- think more carefully about how to use the buying power that big budgets bring – as big players in several markets or as early adopters of fledgling or innovative markets;
- think about how collective buying power can be used to secure greater efficiencies and get future benefits with that money. For example when Government agrees housing contracts they now require apprenticeships to be offered to as part of that deal; and
- change the culture of government contracting so it asks industry to find value for money solutions rather than tender for pre-determined products.
In my view the third of these approaches is probably the most powerful and, if widely adopted, would reap the greatest savings. As an example from our own business, we are frequently asked to bid for the provision of web-based electronic tendering systems. We’ve been providing these systems for almost 10 years and so we don’t think it’s unreasonable to assume that we have learnt a thing or two about what works and what doesn’t work. Yet, when we get the invitation to tender it almost always includes a very detailed specification, not just of what the client wants to achieve, but also how we should do it. How does the client know? What experience have they got of running a website, or an electronic tendering system? We often hear talk of ‘outcome based specifications’ but I don’t think I have ever genuinely seen one.
The civil servants at the Communities Department included some examples of procuring for solutions, i.e. asking the suppliers how best to solve their problem, rather than telling them how they would like it to be solved. Two solutions that I think are worthy of a wider audience were as follows:
- Each year, HM Prisons (HMPS) threw away about 60,000 foam mattresses and pillows, with the majority sent to landfill or disposed of as clinical waste. Instead of continuing with contracts to buy new mattresses they challenged suppliers to find a way to deliver zero waste, recycle all its mattresses and pillows not classified as hazardous, cut hazardous mattresses by 2 per cent per annum and bring costs down. After 30 tenders HMPS signed (in March) a contact which uses innovative new mattress covers that will reduce turnover and all but eliminate the need for clinical waste disposal. No mattresses will be sent to landfill, instead they will be recycled into useful products. Importantly, HMPS is projected to save in the region of £5m over the life of the contract, well ahead of the 2012 target
- Durham County Council set up a food procurement project to cut the costs, improve the food and cut the carbon footprint of their distribution. Instead of pre-deciding how to meet those objectives, they asked suppliers how to do it. As a result, food has improved, costs have been cut, local businesses got involved leading to around 12 000 fewer deliveries – that’s 12 000 van journeys saved. Reducing carbon emissions in a local area is the fifth most popular LAA indicator. LB Lewisham calculated that 70 per cent of its carbon emissions were produced by its supply chain;
The Office of Fair Trading (OFT) has fined 103 companies including many of the UK’s largest construction companies such as Kier, Interserve, Try Accord, Carillion and Balfour Beatty for colluding with competitors to rig the pricing of contracts worth more than £200 million.
Kier was fined £17.9m, more than any other building company. Interserve was fined £11.6m, Try Accord £8.3m, Ballast £8.3m, Bowmer & Kirkland £7.6m, Carillion £5.4m and Balfour Beatty £5.2m.
The most shocking aspect is that these are considered to be respectable companies and not the archetypal cowboy builders that we expect to rip us off. And it is us, the taxpayers, that were being ripped off, as many of these construction contracts were for public sector projects, such as school extensions, refurbishment of council housing, new medical centres, etc.
The investigation focused on the practice known as cover pricing, where one or more of the firms invited to bid submits an inflated price, making a supposed competitors bid look more attractive. This gives the client a misleading idea about the real extent of any competition. Indeed in some cases the winning bidder made payments of up to £60,000 to the others that had submitted high bids.
Predicatably some of the trade bodies such as the UK Contractors Group (UKCG) and the National Federation of Builders have called the fines unfair and that they will cost jobs. Is that really the case though, these companies have broken the law and the fines only account for 1% of their turnover. The Public Contracts Regulations allow for companies guilty of such offences to be barred from participating in any future public contracts, so they seem to have got off rather lightly.
It seems Lord Mandelson has personally intervened to ensure that these firms are not blacklisted by the public sector and unusually the OFT issued a guidance note to public procurement staff at the same time that the outcome of the investigation was announced.
Not every commentator has been so sympathetic, even those who are concerned about jobs in the construction sector. Alan Ritchie General Secretary of construction union UCATT, said: “It is clear that construction companies can’t be trusted to run their affairs properly ….. The cover pricing scandal demonstrates why the construction industry cannot be trusted to police itself.”
Selecting the right contracts to go for is critical to the growth of your business. So often we waste a huge amount of time responding to tenders we are destined never to win. It can be due to a lack of resources, limited experience or it simply just doesn’t fit with your core business.
Here’s a quick and effective checklist for deciding whether you should go for a contract or not.
Rank your response from 1 to 5, with 1 as the most negative and 5 as the most positive answer. If the total score is below 20, you should seriously consider whether it is worth proceeding to Step 2.
1. Were we aware of the opportunity before it was advertised?
2. Do we know the decision-maker(s)?
3. Do we have a significant technical or other competitive advantage?
4. Have we done an effective job of pre-selling for this project?
5. Do we have a champion in-house who is motivated to win?
6. Have we allowed enough time for preparing the proposal?
Answer yes or no to the following Qualitative Factors:
1. Will our price be competitive?
2. Does the opportunity match our target market area and services?
3. Does the project present us with an unusual opportunity to break into a new market?
4. Will the submittal effort be proportional with the expected fee?
5. Is the project consistent with our minimum/maximum project size objectives?
6. Can we make a profit doing this project?
7. If we cannot make a profit, are there any prevailing reasons to want the project?
8. Do we have qualified staff available to perform the work?
9. Do we have the staff and time available to prepare a quality proposal?
10. Do we have the track record/experience for the project?
If you have answered ‘no’ to more than two of these questions, you should seriously consider whether this is the right contract for you.