|
In the UK, there are around 3.75 million small to medium-sized
businesses of which 1.5 million are sole traders. This represents
around 99% of UK businesses. At the start of 2000, the sector accounted
for 50% of UK turnover.
The Government is keen to encourage the participation of small and
medium-sized businesses (SMEs) in the government marketplace. This
is on the basis that achieving a greater degree of participation
will bring wider benefits to the economy, and promote competition
and innovation in government procurement. However, SMEs as a group
are often overlooked within public sector procurements.
A review conducted by the Better Regulation Task Force (BRTF) and
the Small Business Council (SBC) found that SMEs often encounter
greater barriers than other companies. Key barriers include lengthy
and cumbersome procurement processes and the perception that engaging
SMEs is risky. In May 2003, the review made 11 recommendations to
eliminate and address the obstacles that may prevent SMEs from participating
in the government marketplace.
Ethnic Minority Businesses
In parallel with this review, the Ethnic Minority Business Forum
(EMBF) has provided focus on the higher barriers perceived by ethnic
minority businesses (EMBs) and promoted a greater emphasis on diversity
issues.
To address some of these issues and work towards reducing the barriers
faced by SMEs and EMBs, the Office of Government Commerce (OGC)
and the Department of Trade and Industry’s Small Business
Service (SBS) are conducting two pilot projects. One targets the
West Midlands and the other, Haringey.
A wide range of organisations are involved in delivering the pilot
project including Advantage West Midlands, the Government Office
for West Midlands, the Small Business Service, the Office of Government
Commerce, Birmingham Chambers of Commerce, West Midlands Minority
Business Forum and many more.
Improving Competition and Capacity Planning
The Chancellor’s Pre-Budget Report in November 2002 stated:
“The Government has welcomed the Competition Commission’s
recent recommendations to improve competition in procurement and
has asked OGC to consider what further steps can be taken to increase
competition and long-term planning in markets where the Government
possesses significant purchasing power.”
OGC Key Priority
A key priority for the OGC in 2004 is to develop and have agreed
with Ministers plans to increase competition and improve long-term
capacity planning in markets where government has significant purchasing
power.
The OGC prepared a report Increasing Competition and Improving Long-Term
Capacity Planning in the Government Market Place that was accepted
by Treasury Ministers in October 2003. The OGC team comprised Sir
Christopher Kelly, formerly Permanent Secretary at the Department
of Health, and a small team of OGC officials from the Government
Market Division.
Participants in the review included 21 departments, agencies, non-departmental
public bodies and UK embassies and 21 suppliers. An advisory group
comprising officials from HM Treasury, the Department of Trade and
Industry and the Office of the Deputy Prime Minister was established
to steer the work.
The Action Plan announced on 10 December 2003 in the Chancellor’s
Pre-Budget Report aims to fulfil the recommendations of the OGC
report. The overall intention is to make the public sector better
at planning its procurements and communicating its needs to industry
in a way that best uses available capacity within markets and enables
industry to respond effectively, innovatively and at an affordable
price.
Local Government – Stimulating Markets and Achieving
Community Benefits
In the National Procurement Strategy for Local Government the objective
is set that councils should:
• Engage actively with suppliers.
• Use procurement to help deliver corporate objectives including
the economic, social and environmental objectives set out in the
community plan.
Where relevant, all councils shall consult staff during procurement
projects and build employment considerations into procurement processes
and contracts, including compliance with the Local Government Act
2003, Circular 03/2003 and the associated code of practice.
Every council should publish a ‘Selling to the Council’
guide on its corporate website together with details of bidding
opportunities and contact details for each contract.
All corporate procurement strategies should address:
• The relationship of procurement to the community plan, workforce
issues, diversity and equality and sustainability.
• How the council will encourage a diverse and competitive
supply market, including small firms, social enterprises, ethnic
minority businesses and voluntary and community sector suppliers.
Every council should build sustainability into its procurement strategy,
processes and contracts.
Every council should conclude a compact with the local voluntary
and community sector.
Procurement processes for partnerships should include:
• Issuing an information memorandum to prospective bidders
setting out the background to the project, the council’s objectives
and an outline of the procurement process and timetable, with roles
and responsibilities made clear.
• Inviting bidders to demonstrate their track record in achieving
value for money through effective use of their supply chain, including
the use of small firms; this should continue to be examined as part
of contract management.
Every council should include in invitations to tender/negotiate
for partnerships a requirement on bidders to submit optional, priced
proposals for the delivery of specified community benefits which
are relevant to the contract and which add value to the community
plan.
Every council should by 2005 have signed up to the national concordat
for SMEs.
What is Meant by Stimulating Markets and Achieving Community Benefits?
Councils need to encourage a mixed range of suppliers to help stimulate
a varied and competitive marketplace. This includes understanding
the supplier’s perspective and marketing the council to suppliers.
Councils also need a diverse and competitive supply base to help
improve value for money and to develop suppliers to meet new or
emerging requirements.
Collectively, councils have significant buying power. They can use
that buying power creatively to stimulate innovation. By working
with suppliers councils can encourage the best to gear their business
planning and research and development efforts to the needs of local
government.
Under the Local Government Act 2000, councils are required to prepare
a community plan (Community Strategy as defined in the Act) and
have powers to promote the economic, social and environmental well-being
of their communities. Provided that there is compliance with EU
public procurement regulations and Best Value, councils can work
with suppliers to realise ‘community benefits’ of this
kind through their procurement activities.
What should Councils be Doing?
Stimulating Markets
1 Publish a ‘Selling to the Council’ guide. Councils
should publish guidance on their website for suppliers on how to
do business with the council, together with details of forthcoming
bidding opportunities and contact details for each contract. Councils
should have policies in place for choosing publications in which
to advertise to encourage greater diversity and competition. Provision
of an information and publicity service, including use of printed
material, posters and development of the council’s website,
is an effective way of communicating with the diverse population
living and working in the area.
2 Market the council to suppliers. Increasingly suppliers pick and
choose where they bid. Councils need to understand how suppliers
view them (including supplier surveys and
pre-procurement market sounding) and they need to market the council
to suppliers proactively.
3 Promote a diverse and competitive market. Councils should develop
diverse and competitive sources of supply, including procurement
from small firms, ethnic minority businesses, social enterprises
and voluntary and community organisations.
4 Develop a local compact with the voluntary and community sector.
This should include protocols for grant funding and contracts.
5 Sign up to a ‘concordat’ for small and medium-sized
enterprises in the community. The Steering Group of the Local Government
Procurement Forum has agreed to take forward the development of
an SME-friendly procurement concordat, with input from the Small
Business Service, an executive agency of the DTI. The Forum will
agree the terms of the concordat and encourage councils to sign
up.
6 Develop supply chain partnerships. Councils should work with strategic
partners to establish the contribution that small firms, ethnic
minority businesses, social enterprises and voluntary and community
sector suppliers can play in the supply chain. This should continue
to feature as part of contract management.
7 Develop suppliers. The market will not always be able to respond
to the council’s requirements. The council may need to encourage
existing suppliers to enter a new market (eg by encouraging consortium
bids) or develop new suppliers (eg by working with the voluntary
or community sector). Sometimes there will be a need to attract
suppliers from abroad.
8 Use buying power to stimulate innovation. This would include creating
markets for recycled materials and better designed learning resources
for schools. It would also encompass promoting better designed urban
spaces and public buildings through procurement.
New Actions in Place to Cut Red Tape in Government Procurement
Companies bidding for contracts will face fewer bureaucratic hurdles
and more transparency as the Government recently launched a set
of key actions aiming to cut red tape in the government procurement
process across departments. These are outlined in a joint report
from the Regulatory Impact Unit’s Public Sector Team and the
Office of Government Commerce.
Making a Difference: Reducing Bureaucracy in Central Civil Government
Procurement is aimed at commercial activity in government, much
of which is essential to the delivery of vital public services.
The report commits government departments to deliver improvement
actions in a series of milestones over the next two years. This
report can be accessed at: http://www.bipsolutions.com/html/reports.html
Five key areas have been identified and specific actions put into
place for each area:
1 Speeding up the procurement process and reducing costs.
2 Improving leadership and client capability.
3 Improving communication with the market and in government.
4 Focusing on successful project outcomes.
5 Achieving more consistent use of Best Practice.
Douglas Alexander, Minister for the Cabinet Office, said: “Improving
public services is one of the Government’s top priorities.
Much of the public service delivery depends on bought-in services,
so effective procurement is at the heart of the Government’s
Delivery and Reform agenda.”
Review Recommendations
Recommendation 1
The DTI should ensure adequate resources for the ‘Supplying
Government’ web portal project. The portal should advertise
lower-value contracts from across central government and include
information on future opportunities. There should be a named contact
for each advertised contract. The portal should be set up and piloted
by spring 2005.
Recommendation 2
The Office of the Deputy Prime Minister and the Local Government
Association should encourage local authorities to develop ‘selling
to the council’ websites by 2005. Websites should include
information on contracts for tender, forthcoming contract opportunities
and guidance on how to do business with the council. There should
be a named contact for each advertised contract.
Recommendation 3
Within the context of small business support, the Small Business
Service should provide advice and training for small and medium-sized
enterprises on how to do business with central government and local
councils. The Business Links Operators should deliver this by spring
2004.
Recommendation 4
Regional Development Agencies should ensure by spring 2004 that,
as part of the supply chain development work for which they are
already funded, they work with prime public sector contractors to
develop opportunities for small and medium-sized enterprises.
Recommendation 5
The public sector should develop a common core pre-qualification
information document for lower-value contracts so that businesses
do not have to put together different information in different formats
to get past the Expression of Interest stage. The Office of Government
Commerce and the Office of the Deputy Prime Minister working with
the Local Government Association should develop and pilot this by
spring 2004.
Recommendation 6
The Small Business Service should publicise the mechanism for reporting
non-compliance with the Office of Government Commerce ‘Government
Procurement Code of Good Practice’ that firms can use to ensure
that they receive adequate debriefing.
Recommendation 7
The Office of Government Commerce and the Office of the Deputy Prime
Minister with the Local Government Association should consider how
to promote the wider use of the Government Procurement Card, recently
extended by the Office of Government Commerce, to include local
authorities and other non-central civil government bodies, in order
to improve prompt payment by the end of 2003.
Recommendation 8
The Office of Fair Trading should carry out research to identify
the characteristics of those markets where it is important to ensure
that small and medium-sized enterprises are able to compete to ensure
competition, particularly where this may have an impact on innovation
and value for money achieved by public sector procurement. Within
this, it should also assess the impact of framework agreements and
contract aggregation on small and medium-sized enterprises. This
research should be carried out by the end of 2003.
Recommendation 9
Where public procurers opt for
prime contractors, they should ensure that their business case for
doing so in those particular markets brings value for money.
Public sector procurers should ask prime contractors during the
procurement process to demonstrate their track record in achieving
value for money through effective use of their supply chain –
including use of small and medium-sized enterprises. This should
also be examined as part of the ongoing contract management. Public
sector procurers should ensure that prime contractors pay subcontractors
on time and that when paying progress payments to prime contractors
the payments flow down through the supply chain.
In order to make subcontracting opportunities more transparent to
small and medium-sized enterprises, government departments and local
authorities should list details of prime contractors and contracts
on their websites.
Recommendation 10
The Local Government Procurement
Forum, with input from the Small Business Service, should develop
an SME-friendly procurement concordat. All local authorities should
be able to sign up to this by 2005.
Recommendation 11
The Office of the Deputy Prime Minister and the Local Government
Association should encourage local authorities to set out in their
procurement strategies the steps they are taking to engage with
small and medium-sized enterprises by the end of 2003.
Government departments should include in their procurement policy
statements the steps they take to engage with small and medium-sized
enterprises by the end of 2003 or publish this information in their
annual reports.
All information in this Guidance is checked and believed to be
correct, but cannot be so guaranteed, and the publishers shall not
be liable for any loss suffered directly or indirectly as a result
of its use.
BiP Solutions Ltd, Park House, 300 Glasgow Road, Shawfield, Glasgow
G73 1SQ
Tel: 0141 332 8247 Fax: 0141 331 2652/2792 Email: bip@bipsolutions.com
Web: www.bipsolutions.com
© BiP Solutions Ltd 2004
|
