Opening up procurement to SMEs
Ibec’s Aidan Sweeney explains why a national public procurement strategy for SMEs is necessary and sums up the key practical changes that would create more opportunities for small firms.
In March 2014, Ibec launched a major new campaign – ‘An Ireland that works’ – which sets out the business priorities for the next phase of the recovery. Business has prioritised the need for better government by achieving cost efficiencies through public procurement reform and encouraging SME participation.
Over the last six years, government’s public procurement strategy has been slowly shifting from a mechanism that delivers unilateral cuts to one that can secure sustainable savings for tax-payers. To put it simply, public procurement was seen as a soft target but little was done to address the fragmented structures across the public sector resulting in procurement being performed in many organisations in an uncoordinated fashion. This first began to be addressed by the National Procurement Service prior to the establishment of its successor, the Office of Government Procurement (OGP).
Greater centralisation and aggregation of contracts for goods and services is to be expected. Buying decisions should no longer be based solely on lowest price, a major barrier for SMEs, and the new centralised structures should focus on value for money. However, a lot more can be done to address the concerns of SMEs about the lack of a level playing field in tendering for public contracts. Achieving efficiencies and savings through procurement can come as much from addressing administration issues as from changing its approach to the market outright. Specifically, new suites of standardised terms and conditions should be developed. This would allow companies to familiarise themselves with the relevant documentation, know how it is applied and the criteria used. We are increasingly seeing evidence of different terms and conditions being sought where these may not be relevant to the conduct of the contract. Consistency around indemnity and liability provisions is also needed because they can be barrier themselves. If companies see disproportionate criteria being sought, many will simply walk away from bidding.
Market access
Circular 10/14 was published earlier this year on improving SME access to public sector markets. The OGP must ensure that it is fully implemented in a consistent manner across the public sector. All public sector bodies, including the OGP, should publish an SME procurement statement to inform companies about what they can expect when bidding.
Public sector bodies could go one step further and include a ‘doing business with us’ section on their respective websites detailing categories of goods and services consumed, who would be purchasing (e.g. using central framework contracts) and what criteria one could expect. Such an approach would improve the visibility and communication of public procurement. There needs to be more widespread use of technology to reduce costs, paperwork and other procurement constraints. Government should produce a new e-procurement strategy. The last such strategy was developed in 2001 and we would like to see one that goes beyond what is set out in the EU procurement directives in line with the national payments plan to allow full submissions and payment through the e-procurement process.
Centralised buying structures will remove local buying knowledge to a certain degree. Take, for instance, companies that already have public contracts and are concerned they will see the market and the contact point changing. Central category councils are being set up to coordinate specific spending areas. Each is charged with conducting a full needs analysis for each category and then developing go-to-market strategy. It is important that the category councils under the OGP and the sector leads across health, education, defence and local government establish more of an ongoing practical engagement with SMEs about what they will buy, who they will buy it from and the terms and conditions they seek. It is important that we get this right because of the purchasing power of each council and the potential ramifications it can have on a given market.
Category councils should be required to produce both annual and multi-annual procurement plans. This would help to inform the market and SMEs in looking at what strategies they should use to position themselves in order to bid for all or part of a large framework contract. Framework contracts will be a key tool of the OGP in its reformed procurement practices. However, the OGP should adopt the ‘comply or explain’ principle to the use of lots and how they are divided. It should have to explain occasions when large contracts are not divided into lots and be encouraged to consider dividing the contract according to region rather than specific items in order to bring in more localised SMEs into the process.
Not only should membership of the each category council be published, one member of each council should be given specific responsibility for the SME community within those markets. This role could inform market engagement strategies and procurement procedures, as well as identifying potential barriers preventing SMEs from bidding for contracts. Category councils should also host regular meet-the-buyer events and also partnering events for their respective areas.
Of course, there’s more that we can do to improve market access such as encouraging innovation and take-up of technologies from some of the newer companies, as well as looking at procurement as an export market. Training will also be essential to improving SME access to the public sector market place.
This could focus on bidding techniques, administrative compliance as well as on soft skills should as early market engagement and appropriate sales strategies. We must ensure the development agencies will have adequate supports available to help SMEs in addressing their training needs.
A national strategy with the specific aim of developing a procurement culture inclusive of SMEs is clearly required.
Aidan Sweeney is Senior Executive for Government, Enterprise and Regulatory Affairs at Ibec.
